The house party may just be getting started.
The recovery in housing that began taking hold last year caught most economists by surprise. Even though the overall economy made only middling progress, even though there was still a mess of homeowners underwater on their mortgages and even though banks remained reticent about lending to buyers, sales and prices picked up.
The housing reports this week—January new-home sales and December home-price indexes are due on Tuesday, January pending home sales come Wednesday, and January construction spending is out Friday—should reflect further improvement in the sector. So should fourth-quarter results out Monday for Lowe's Cos. and out Tuesday for Home Depot Inc.
Yet just because housing has gotten better doesn't mean there isn't a lot of room for improvement. Take Tuesday's new-home sales report from the Commerce Department. Economists polled by Dow Jones Newswires estimate a seasonally adjusted 380,000 homes were sold last month, at an annual rate. That would be better than December's 369,000 or the year-earlier level of 339,000, but about half the average of the 1990s.
One problem for housing is that a lot of people, despite wanting to move, have stayed put because they couldn't stomach the low price their old house would fetch. That has put a freeze on the market, leading real-estate agents to complain about inventory.
The recent move higher in prices—economists estimate that the Standard & Poor's/Case-Shiller 20-city index on Tuesday will show a 6.6% increase in December from a year earlier— should shake some of those homeowners off the fence, says Thomas Lawler, an independent housing economist in Leesburg, Va. The busy spring-selling season that will soon get under way should witness the first significant year-over-year increase in prices since 2006.
Any unlocking of the housing market could be particularly good for home builders. That is because new-home buyers are typically trading up from a house they already own, rather than making a first-time purchase.
It could also be a big plus for the economy: America does better when people are moving to where there is opportunity instead of being stuck in place.
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