The top chart shows real median home prices for sales of existing single family homes on a non-seasonally-adjusted basis (prices typically rise in the first half of each year, then typically decline). The bottom chart shows the year over year change in these prices in order to factor out the seasonal trends. As both charts suggest, we have likely seen a bottom in home prices, at a level that extends back to the 1970s. Real home prices hit decades-low levels and in effect they were even much cheaper thanks to record-low financing costs.
Message: the housing market has found a market-clearing level of prices, and demand is now picking up. Demand could outstrip supply—even if all those foreclosed homes held on banks' balance sheets were released for sale—if the public begins to catch on to the fact that homes are beginning to rise in price at a time when prices are still incredibly low. The very low level of mortgage rates tells us that the demand for purchasing homes is still incredibly weak; there are likely legions of buyers who have been sidelined for fear that prices would continue to decline given the economy's ongoing weakness and the overhang of under-water homeowners.
Although May sales of existing homes were slightly lower than in April, I think this chart makes the larger point that the volume of sales is trending higher from recession lows. There is lots of pent-up demand and it is slowly but surely coming back.