The health of the housing market has come under fresh doubts after the National Association of Realtors released substantially revised figures showing 3 million fewer homes than previously thought were sold between 2007 and 2010.

The good news is that NAR’s revised data show that inventory of unsold homes has dropped to a level not seen since 2005; a smaller backlog of homes is generally viewed as a precondition for a healthy clearing market.

Indeed, much of the early analysis in the media seems to suggest the housing market is turning  a corner, that the bad news belongs to the past while recent positive home sales and housing starts data, together with low mortgage rates, foretell recovery.

Richard Green, director of the USC Lusk Center for Real Estate, in an interview with AdvisorOne, offered a more sober view of current real estate trends, saying he was “neutral to very cautiously optimistic” about the housing market.

Richard GreenThe NAR’s double counting, he said, affects both the numerator and the denominator, meaning that fewer homeowners than previously thought were willing or able to sell their homes in the past few years. “You’re looking at a 14% downward revision in sales. That means we’re probably 14% further away from being through this,” Green, (left), says.

One positive for the real estate market’s revival prospects, at least in theory, are today’s low mortgage rates. A survey of rates conducted by Freddie Mac, and released Thursday, shows mortgage rates reached their all-time low this week. But, Green says, “the effectiveness of low rates is being blunted by how difficult it is to qualify for them.”

In related news, the HousingIntelligencePro newsletter reports that, despite record low rates, 38% of home purchases this year were paid in cash. That is exactly twice the level of cash home purchases in the healthier housing market of 2006. Green was unsurprised by this statistic, not only because of the difficulty of obtaining financing for a mortgage, but because of the search for dividends in today’s low-yield market environment.

“If you have cash, you can buy houses at a pretty substantial discount,” Green says. “There are a lot of people who are investing and renting these places out. If you buy a house in Bakersfield, [Calif., for example], you can get a 7% or 8% dividend. By not having debt service, you’re in a very safe place.” Green says cash buyers can typically get a 5% to 10% discount off the purchase price since sellers don’t risk the sale falling through because a loan is denied.

Looking ahead, Green says one possible reason for cautious optimism in the housing market is the government’s new Home Affordable Refinance Program. While previous HARP programs have failed, new rules changes that go into effect Jan. 1 should make it a lot easier to refinance Fannie Mae and Freddie Mac loans, he says.