Housing market will pick up along with job creation

The jobless rate needs to remain at 9.4 percent or below and the economy should be adding at least 200,000 jobs a month by the end of 2012 for the housing market to improve, according to Crowe.

“Home sales are going to struggle, but they will follow employment,” Crowe said. “That’s clearly the trigger: A better employment market giving people the comfort that they can go forward with a major purchase like a home.”

The market has struggled under the weight of high unemployment, tighter mortgage lending standards and continued uncertainty about home prices. Meanwhile, mortgage rates have hit historic lows in the past several months and falling home prices have made homes more affordable. 

Nothaft is expecting housing prices to hit bottom by spring of this year before starting a gradual rise in 2012.

On the price front, Crowe expects prices for new and previously occupied homes to be flat this year and increase about 1.4 percent next year.

“This is the time to come in the market if you’ve got the financial resources and wherewithal,” Nothaft said.

Crowe expects the upcoming spring, traditionally a strong season for home sales, to be better than last year’s, even without the aid of government tax credits, which expired April 30. 

“The stimulus this year will be job markets,” he said.

Crowe is forecasting that 405,000 new homes will be sold this year, up 26 percent from 2010. That’s still below the 600,000 generally considered a healthy number.

Still, some housing analysts expect it could take several years for home sales to reach those levels. 

Lower unemployment could push up demand to purchase a home and boost construction, especially single family homes, Crowe said. He expects they will rise 21 percent to 575,000 this year and climb to 860,000 in 2012.

Nothaft also sees home construction rising about 20 percent.

“It’s still far, far below levels we had seen prior to the downturn in the housing industry, but at least we’re moving in the right direction,” Nothaft said.

Low mortgage interest rates may be fleeting, with Nothaft estimating that rates will climb to 5.5 percent by the end of this year and as high as 5.8 percent in 2012.

Other economic indicators could bolster the predictions by Nothhaft and Crowe as households pay down debt and increase their savings and spending. 

“That suggests to me that consumers are finally willing to go forward with a more substantial financial commitment,” Crowe said.

Still, markets that have been hit the hardest by foreclosures in California, Florida, Nevada and Arizona, will take longer to recover, they predicted.