The housing market has improved in the last two years to the extent that it is possibly approaching the beginning of its next up cycle.

Three factors needed for such a transition include demand, supply and investment..

More than two years later, job growth is coming back slowly and renters are beginning to recognize favorable buying conditions. New home construction is at an all-time low and is likely to remain low until REO inventory clears.

As for the investment situation, mortgage rates and home prices fell dramatically since March 2008, creating the best buyer affordability conditions in about 30 years, the firm said.

"We are at Stage 1 (The Bottom) and heading into Stage 2 (The Beginning)," CEO John Burns said in a statement today. "While we think Stage 2 will last longer than usual, we want to point out that the downside of investing in housing right now is about as low as you will ever see."

Solid job growth, a wealth of available home equity for down payments, low mortgage rates, high consumer confidence, low levels of new home competition and availability of affordable homes all would make for a "good" housing market, the firm said in early 2008.

But as of July 2010, the "only boxes that can be checked�are low mortgage rates and affordable homes," the firm said today, adding that job growth is key to pushing recovery in the housing market forward.

This article has been republished from HousingWire. You can also view this article at HousingWire, a mortgage and real estate news site.