(Bloomberg News) Dan Kowalyshyn figures he owes about $200,000 more than what his four-bedroom house is worth today. It faces a cul-de-sac where three of the six homes have been lost to foreclosure since his $570,000 purchase in 2006.
The software developer has decided to keep up on his mortgage payments because he sees signs of improvement outside his window. Trucks drive by to deliver lumber for houses being constructed by PulteGroup Inc., KB Home and Meritage Homes Corp.
"Either those builders are insane or they're getting some traction selling new homes," Kowalyshyn, 40, said in a telephone interview from his house in Eastvale, California, 45 miles (72 kilometers) east of Los Angeles. "I think we're seeing the beginning of a recovery."
After several false starts, housing is flashing the strongest signals yet of a sustainable rebound. While foreclosures continue to depress prices, buyers are wading back into the market, lured by rising employment and record-low mortgage rates. Six years into the biggest real estate collapse since the Great Depression, housing may become a net contributor to the U.S. economy for the first time since 2005.
"There are definitely green shoots in the housing market, no argument about that," said Peter de Bruin, an economist at ABN Amro Group Economics in Amsterdam. He is the most accurate forecaster of new-home sales, along with his colleague Maritza Cabezas, in the two years ended Feb. 1, according to data compiled by Bloomberg. "Housing will contribute modestly to recovery this year and we will see a sustained recovery in 2013" that probably will continue through 2015, he said.
'Improved Somewhat'
The Federal Reserve, in its regional Beige Book business survey issued Feb. 29, said the housing market has "improved somewhat in most districts" with "several reports of increased home sales and some reports of increased construction." Among the Fed's 12 district banks, "Boston, Cleveland, Richmond, Atlanta, Kansas City and Dallas reported growth in home sales," and "Philadelphia reported strong residential real estate activity."
Speculation that new home sales will rebound has boosted shares of homebuilders, with the 11-member Standard & Poor's 1500 Homebuilding index up 17 percent this year, compared with a 9.3 percent gain for the Standard & Poor's 500 Index.
Early signs of a recovery haven't revived prices, which have continued to fall as distressed real estate sales depress values. The S&P/Case-Shiller index of 20 U.S. cities fell 3.9 percent last year to a post-crash low, sinking prices on repeat sales to 34 percent below their July 2006 peak, according to a Feb. 28 report. Short sales, when owners sell for less than the amount owed, and foreclosures accounted for 35 percent of January transactions, according to the National Association of Realtors.
Declines Leveling Off