WASHINGTON By most economic measures, the moribund housing sector seems to have turned a corner and is now firmly in recovery. For many homeowners, however, it may still feel like a statistical rebound because an improving housing sector is not the same as a healthy one.
Economists are broadly in agreement that housing is no longer weighing against economic growth and will be a positive contributor in 2013.
That's supported by most measurements of the housing sector, be they starts of new single-family homes, sales of existing homes, rising median home prices or shrinking foreclosures as a percentage of total sales.
"The current forecast is for 5 million existing homes and 500,000 new single-family (housing starts), that's a pretty healthy growth in existing sales of about 8.5 percent," said Danielle Hale, director of housing statistics for the National Association of Realtors.
Sounds good, but there is a sobering footnote.
"They're coming off of extraordinarily low levels," cautioned Hale. "That's still a below-trend growth rate."
After several years of false projections that housing had hit bottom, it appears the sector truly is in recovery mode.
"I think housing has clearly bottomed. But I think there (are) clearing skies, not blue skies," said Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, N.C. "It's going to be years for housing to get back to what's considered normal."
Pending home sales, although declining in December, have stayed above year-ago averages for 20 consecutive months, according to data released Monday by the National Association of Realtors.
And the group reported earlier in January that housing was at record affordability rates in 2012, for the second straight year. "Distress" sales, which in 2011 represented 32 percent of all home sales, fell to 24 percent last year.
An improving housing market is important for U.S. economic growth. For much of 2005 and 2006, investment in residential housing ranged between 5.5 percent and 6.3 percent of the nation's gross domestic product, the broadest measure of the sale of goods and services. It plunged during the financial crisis of 2008, dropping to just 2.2 percent of GDP for most of 2011 and climbing to just 2.6 percent of GDP in the final three months of 2012.
Whether it's a good or a bad market depends on perspective. For the first 11 months of 2012, a housing affordability index compiled by the Realtors' group showed record levels, and that's great for buyers. The index measures the relationship between median home prices, median family income and mortgage rates.
And prices are going up, which would seem good news for sellers. The latest read from the closely followed Case-Shiller Indices, which track metropolitan home prices in 10-city and 20-city composites, was positive.
The creator of the indices, Yale University economist Robert Shiller, isn't ready to declare victory for the housing sector. Interviewed on Jan. 24 by Bloomberg Television at the World Economic Forum in Davos, Switzerland, Shiller said there's still much uncertainty ahead.
"The short-term indicators are up now, it definitely looks better, but we saw that in 2009," he said, referring to a period in which homebuyer tax credits helped spur sales, but homebuying faded when the tax credits were removed.
In hard-hit cities, rising prices reflect the fact that distress sales are now a smaller percentage of total sales. But in more stable areas, higher prices partly reflect a shrinking inventory of homes for sale. This is because many homeowners who'd like to sell their homes still owe more than they're worth and keep them off the market.
The National Association of Realtors reports that December 2012 inventory was almost 22 percent below December 2011. With fewer homes on the market, some areas are experiencing bidding wars reminiscent of the housing boom in 2005 and 2006.
The tight inventories are likely to translate into higher prices in 2013. By historical standards, buying will still be cheap, just not as cheap as in 2011 and 2012. That's evident in California, which last year closed with a bang that's unlikely to be repeated in 2013. The California Association of Realtors reported on Jan. 15 that median home prices were up 27 percent between December 2011 and December 2012. Sales volume was up by a more modest 5.4 percent compared with 2011.
"The substantial increase in price was due in large part to a significant increase of higher-priced properties, while inventory constraints continued to constrict sales of lower-priced homes," the group said in a cautious report. "Price increases are not expected to continue at a high pace in 2013."
Moody's Analytics forecasts price declines for much of California. Coastal cities such as San Diego and San Francisco are expected to see rising home prices, but not so for inland metropolitan areas.
"Sacramento is relatively better off because it has a more stable income base. (In) Stockton, Modesto and Merced we expect foreclosure sales to keep pushing down on prices for the next two or three quarters," said Carbacho-Burgos.