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Is the Housing Market Finally Rebounding?

David Francis

Throughout the country, homes that once sat on the market for years are now in demand. According to a survey conducted by housing research firm Metrostudy that covers 65 percent of the country, there are less than 30,000 vacant new homes on the market. In the pre-bubble housing market, there were typically 100,000. Last month, builders constructed new homes at the fastest pace since 2008.

These are just a few of the growing number of signs that the five-year-long housing slump might finally be coming to an end.

[Read: 10 Ways Your Home Can Pay You Money.]

Some others: Earlier this week, the Commerce Department reported that the construction of new homes accelerated by 15 percent in September, the fastest rate in four years. In a research note entitled "House Price News Continues to be Good," Goldman Sachs predicted housing prices will increase by 2 percent in 2012. Jamie Dimon, CEO of JPMorgan Chase, said recently that the housing market has "turned the corner."

The government and big banks aren't the only ones seeing a housing recovery. According to Fannie Mae's September 2012 National Housing Survey, which measures public attitudes about the housing market each month, just 11 percent of Americans believed their home's value will decline.

"Consumers are showing increasing faith in the nascent housing recovery," says Doug Duncan, senior vice president and chief economist of Fannie Mae. "Home price-change expectations have remained positive for 11 straight months."

A housing rebound is also good news for the wider economy, as housing recoveries typically coincide with broader economic recoveries. However, according to experts, these small pieces of good news are just the start of a housing recovery that could take more than a decade, paving a long road for the housing market to return to its pre-bubble strength.

"Everyone is so ready to call this a recovery," says Kevin Finkel, executive vice president of Resource Real Estate, a national real estate management firm based in Philadelphia. "They may actually delude themselves into changing the psychology enough to move prices up."

[Read: Should You Include Your Home in Your Net Worth?]

Even if optimism about the housing market is bloated, the string of positive housing indicators is undeniable and has helped buoy the economy in recent weeks. Construction companies have been one of the main beneficiaries, with stocks of building companies like PulteGroup, Lennar Corp, and D.R. Horton surging.

Such increases restore investor confidence in the rest of the stock market: If stock prices of building companies are surging, more people are building homes, which indicates an increased confidence in the future of the economy.

An increase in home construction also means an increase in construction jobs, many of which were lost during the Great Recession. This also translates to more jobs for specialists like plumbers and electricians.

Despite the good news, real estate expert Steve Harney says not all areas of the country are rebounding. Home prices in states in the northeast remain flat. "Most of the country is doing very well, but the Northeast still has to work through some shadow inventory," Harney says.

The first phase of the sales recovery is just beginning, he says. Houses are relatively cheap and people are feeling better about their economic prospects. They're consuming excess supply that has weighed down the market for years.

"In a down market, there's an overabundance of supply and there's not enough demand. The recovery means that the demand and supply are getting toward more normal numbers," Harney says. "In the past few years, the demand was down because there were so many questions about the economy."

[Read: Is Debt Overhang What's Preventing a Strong Recovery?]

The pricing recovery, Harney says, will take years. According to a recent report from the analytics firm Fiserv, prices won't return to their pre-bubble levels until 2023.

Harney says this lag is due to the way people viewed housing during the boom years. "In the past, if you stayed in a home you bought, you're going to walk away with a package for your retirement. No one saw housing as an investment," he says. "Then 2004, 2005, and 2006 came along, and everyone thought it was a six-month investment. They thought that you could buy a house and sell it the next year for a big dollar amount. That feeling permeated the country."

Like Harney, Resource Real Estate's Finkel remains relatively unmoved by the positive housing signs. He says housing has been in decline for so long that people desperately want it to improve--and they'll ignore information that points to a flat market.

"I'm very skeptical that we're in an environment where housing prices are going to rise. There are a lot of foreclosures that are in process right now. There's a lot of supply overhang," he says.

Finkel adds that he doesn't think housing can fully recover until the broader economy improves. "In the short term, the dire jobs situation is more important than housing prices. Until you get real job growth and get real pricing power with incomes, it's hard for me to see a real housing rebound," he says. "People have to pay their mortgages somehow."

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