"Prices are continuing to go up," he said. "Demand is outstripping supply, so pricing is reacting. You can listen to [the National Association of Realtors] that there's another 9 to 10 percent price increase between now and the end of the year."
(Read more: John Paulson calls buying a home 'the best investment' out there)
Inventory is "selling as quickly as we can get it," Smith said, estimating that turnover is 5.2 months nationally and may extend to six months by next year.
Early indications are that higher interest rates are having little impact on home sales, he said.
"We're a firm believer that affordability is the issue," he said, citing data from the National Association of Realtors that suggest buying a home is still affordable. If mortgage rates rise to the level of 6 percent or 7 percent, affordability could suffer, he added, "but we have a long ways to go."
(Read more: New home sales surge to five-year high despite higher rates)
But the market is difficult for first-time homebuyers, who are subject to mortgage underwriting restrictions, Smith said. He is hopeful that the final Dodd-Frank rules will include a less cumbersome definition of a qualified residential mortgage (QRM).
"Right now, lenders are lending at the highest possible standard, because they don't know the rules," he said, adding that rules on lending will be "more practical" when QRM is defined
(Read more: Mass defaults bring Obama housing rescue under scrutiny)
Other potential regulatory changes are removal of the 20 percent down payment requirement and relaxation of the obligation for lenders to hold a percentage of a given loan on their balance sheet, Smith said.
"All that now is in play," he said.