5 Key Questions About This Housing Recovery

The housing market appears to be heating up, but risks remain.

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[Read: For Real Estate Investors, Time to Scout New Locations.]

4. If you really want to buy, where are the bargains? On paper, it's not hard to find apartments and other real estate that appears to have a positive cash flow. Some people have been putting cash into foreclosed properties that have been underpriced, although it's a difficult science requiring money, patience, and careful analysis. Banks still own some $30 billion of foreclosed properties, but in many areas, the much-touted foreclosure market is picked over and probably not the best place for non-professionals to find deals, says Andrew Gorczyk, a portfolio manager at Signature. Still, for wealthier investors, there may be opportunities including what Gorczyk calls "country club investments," in which a group of buyers scout properties and chip in $10,000 to $50,000 for apartments or other income-producing properties and private equity funds.

5. Should homeownership be part of your financial plans? An entire generation entering the working world is facing bleaker job prospects than any time since the FDR-era Depression. Says Finkel: "We may have reached a plateau in the single-family home market. Young people are not buying." But there is no clear evidence to prove that the rent-not-buy trend will stick. To be sure, renters have been reluctant to put their savings at risk by purchasing homes. But they are also unnerved by rising rents, says Gorczyk. Some worry that prices may rise to unaffordable levels and they will be locked out forever. But there appears to be no reason to have "buyers' panic." Prices appear to be rising slowly and steadily, in line with the long-term trend.

[Read: 10 Ways Your Home Can Pay You Money.]

Another reason to own a home, beyond simply having a place to go at the end of the day, is to provide "a measure of inflation protection," Courtney says. But "if you own a home already, there is no strong reason to add more real estate investments to your portfolio."

More broadly, the modest recovery is small consolation for the millions stuck in homes they bought over the past decade that are now worth less than they paid. The recovery is bestowing its gains unevenly—but more rationally—than in the past, which could warm the hearths of homeowners and real estate investors going forward.

"It's still the American Dream," says Gorczyk. "There was a lot of misery during the housing collapse, but most individuals and investors forget those negative things pretty quickly."

Corrected on 01/22/2013: A previous version of this story misstated Andrew Gorczyk's title. He is a portfolio manager at Signature.