By year-end, Fannie Mae economists expect home sales to increase approximately 9% from last year’s levels, reaching an estimated 4.98 million units.
That same team of experts also believes home prices hit bottom in the first quarter of this year and estimates prices will be up 2.9% at the end of 2012.
Citing a similar outlook, Freddie Mac vice president and chief economist Frank Nothaft added, “housing is resuming its traditional role of leading the recovery charge and once again being the bright spot in the economy.”
Both groups agree that record low mortgage rates and current pricing will likely bring more buyers into the housing market.
Other key factors fueling the housing recovery are fewer homes available for sale (low supply is helping push prices up) and the fact that rising rents are making the purchase of a single-family home or condominium more attractive.
As evidence, the National Association of REALTORS® (NAR) latest report shows sales of previously occupied homes rose 2.1% to 4.79 million in October, landing sales near their highest level in five years (excluding temporary spikes in 2009 and 2010 when homebuyer tax credits boosted numbers).
Plus, US home building rose in October to its highest rate in more than four years and builder confidence rose to its highest level in six and a half years.
According to a survey by the National Association of Home Builders (NAHB)/Wells Fargo, the index of builder sentiment rose to 46 this month, up from 41 in October. That’s the highest reading since May 2006, before the housing bubble burst.
Even as readings below 50 signal negative sentiment about the housing market, the index has been rising since October 2011, when it was 17. It has surged 27 points in the past 12 months, the sharpest annual increase on record. Builders are reporting a jump in prospective buyers at a level not seen since April 2006.
Similarly, housing starts increased 3.6% last month from September to a seasonally adjusted annual rate of 894,000, according to the latest Commerce Department report. Compared with a year earlier, new-home construction was up 41.9%. That’s the highest rate since July 2008 when the financial crisis was looming.
Here in northwest Indiana, the latest data available from the US Census Bureau shows new residential building permits (the measure for future building) through September were up 44% in Lake County and 31% in Porter County this year over last.
It’s important to note that while new homes represent less than 20% of the housing sales market, they have an outsize impact on the economy. Each new home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the NAHB.
“The overwhelming trend here is a housing market that has clearly shifted into recovery mode,” BMO Capital Markets economist Robert Kavcic declared in a note to clients.