Buoyed by several months of encouraging housing data, an increasing number of economists and industry experts are sticking their necks out to say that this year's housing market is going to be different.
Besides the obvious improvement in the labor market, "there are some fundamental things that are shifting in the real estate space that bode well for the balance of the year," says Budge Huskey, president and chief operating officer of Coldwell Banker Real Estate. "We've had several straight months of positive housing data [that's] really been in line with the more positive economic data. They are going in lockstep."
More positive news about the economy and housing market has given Americans a little more financial confidence, experts say, and more would-be buyers have been poking around the housing market this spring.
Still, getting window-shoppers to make the jump to homeownership has been a nagging problem that continues to weigh down the housing market. But now, according to a recent survey by Fannie Mae, consumers have a few more incentives to make a move on purchasing a home: rising rent, rising home prices, and rising mortgage rates. Those factors are bringing back more "traditional elements" of the real estate market, Huskey says, a sign that the housing market is recovering.
"When you look at the fact that the last couple of years we have really seen principally first-time home buyers and investors in the market, and we are now beginning to see a return of the move-up market and the second home market," Huskey adds. "The fact that those buyers are returning to the market is very much a positive."
Pent-up demand that's been simmering for the past few years will also play to the housing market's favor, experts say. After falling below the 400,000 mark for the past few years due to the bad economy, experts say the number of potential American home buyers could hit more than 1 million this year, much closer to the more-typical 1.3 million entering the market annually.
While not every potential home buyer will purchase a home, increased demand for rental properties could drive vacancy rates lower and push up rent prices which were already up 3 percent last year according to some estimates. That could ultimately force more people into taking a serious look at buying, experts say.
"There have been some pretty interesting moves in consumer attitudes, which could have some influence on getting consumers motivated to actually purchase" says Steve Deggendorf, director of strategy at Fannie Mae. "With [the expectation that mortgage] rates might rise and prices might rise, some people might be saying 'Maybe I need to get off the sidelines' in particular if I think my rental costs are going to go up."
After inching up a bit earlier this year, 30-year-fixed mortgage interest rates have sunk back toward record lows, now around 3.98 percent according to Freddie Mac. But with economic growth picking up steam, experts say there's really only one direction interest rates can go: up. The prospect of paying more in interest every month could add the extra pressure needed to tip the scales in favor of homeownership for some Americans, experts say.
But despite what economists and experts say is an encouraging shift in consumer attitudes about the housing market and home purchasing, the way Americans feel about the direction of the economy still has a long way to go. Almost 60 percent of Americans still believe the economy is on the "wrong track" according to Fannie Mae's survey, which could keep consumers hesitant about big-ticket purchases despite improvements in the labor market.
"Consumer confidence as a whole has been improving, but we're going to be in this particular situation for awhile," says Gus Grizzard, owner and broker of an ERA franchise in Leesburg, Fla. "We still have a lot of question marks when it comes to the economy, but we're moving in the right direction."