The U.S. housing rebound will likely be shallow, but it finally appears possible.
C onditions for a sustainable bottom in U.S. house prices have slowly been building over the past several months. Supply from distressed sales is showing signs of moderating, improving job prospects are boosting consumer confidence about major purchasing decisions and extremely low interest rates are enticing potential buyers.
Indeed, the latest Federal Reserve Senior Loan Officer Opinion Survey showed that demand for prime mortgages rose to its highest level in three years. Increased buyer traffic was also confirmed by the sharp rebound in the NAHB home builder survey in May. This is supported by an increase in April housing starts for both single-family and multi-family projects (albeit starts still remain low).
These developments give credence to our view that the U.S. housing market is on a gradual road to recovery. The residential real estate will not make a significant contribution to GDP growth over the next year, but at least it will finally no longer be a drag.