Is the Housing Recovery For Real?

National housing data has been positive recently, but it could be misleading.

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Beware of animals in your home or garage.
Beware of animals in your home or garage.

According to most accounts, all signs are pointing to a real recovery taking hold in the nation's housing market—shadow inventory is falling; housing starts are surging, and home prices are on track to post their first annual gain since 2006. Perhaps most important of all, the labor market outlook is improving.

But while most of the coverage of the housing market lately has been positive, it might also be exaggerated, according to a new report.

[READ: Nation's Shadow Inventory Falls to More Than 3-Year Low]

"While we have seen many dramatic headlines touting the housing recovery over the past 3.5 years, these headlines and the analysts who author them have been overpredicting changes in the housing market," Laurie Goodman of financial services firm Amherst Securities, wrote in a report released this week.

According to her, after netting out all the seasonal factors—such as the fact that more distressed properties are sold in the fall and winter than in the spring and summer—home prices have been essentially flat over the past few years.

[READ: Good News in Housing Bodes Well for Obama Campaign]

So is it time to hunker down for a chilly winter in the housing market? Probably not, but it's also not an occasion to assume that the real estate market is fully revived.

According to most experts, home prices are expected to grow about 1.5 percent over the next year, a siren song to would-be sellers hoping to get a better price for their properties. Lack of desirable and affordable homes for sale has been an issue impeding better homes sales and a more robust housing recovery for several months now, but experts are hopeful that with rising prices, inventory will follow.

"There's nothing for sale right now. That indicates that thought it's improving, the housing market is far from healthy," says Ron Florance, managing director of investment strategy at Wells Fargo Private Bank. "Once people feel real estate is back up to fair valuations, we'll see inventory levels pick up."

But that story will likely unfold very differently across the nation. Now more than ever, the concept of a "national housing market" is becoming increasingly obsolete. Although the overall housing market tanked, its recovery has been much more fragmented, especially when it comes to the nation's shadow stock of seriously delinquent and foreclosed homes—2.3 million strong according to the most recent data.

[Read: Is Home Flipping En Vogue Again?]

In so-called judicial states—those that require court orders to proceed with the foreclosure process—shadow inventories have swelled, putting downward pressure on home prices. Continued delays in foreclosure processing in those states will likely hinder broader recovery in home prices there and could even result in further price declines, experts say.

Still, experts are optimistic that the housing market is trudging up, albeit slowly, from the depths of the worst housing crisis in recent memory and while recent indicators look good, they caution that this recovery won't look anything like the housing market Americans were used to in the mid-2000s.

"This recovery doesn't look like 2006, because 2006 was a bubble," Florance says. "Recovery looks like 2002 or 2003. People think recovery is when we get back to our high water mark, but that will be another decade."

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  • Meg Handley is a reporter for U.S. News & World Report. You can  follow her on Twitter or reach her at mhandley@usnews.com.