Seven reasons the housing market is on the rise

Real estate is the healthiest it has been in a decade, Editor of InvestorPlace.com Jeff Reeves recently declared.

Reeves cited seven reasons why the housing industry is better than it has been in years and why he believes it will continue to soar.

1. Home Sales. New home sales hit a seven-year high in May, with 546,000 units blowing away forecasts of 525,000 units sold. In the Northeast, a region that had seen sales earlier this year struggle thanks to weather, new homes sold at an amazing rate that was up 87.5 percent over the previous month. Strong existing home sales were also encouraging for May, with recent numbers showing a five percent-plus growth rate there as well, and the strongest overall pace since late 2009.
2. Home Prices. Yes, the pace of increases in home prices has cooled, but given past experiences with an overheated housing market, that’s not a bad thing. According to the latest Case-Shiller data from the end of May, home values rose 5 percent from a year earlier in the 20-city index. Separately, real estate data firm FNC tallied a 5.3 percent increase in its larger 100-city price survey. So prices still are rising, albeit at a more moderate pace.
3. Home Equity. Digging deeper into prices and home values, CoreLogic just released a report that revealed another quarter of a million U.S. homes had equity that topped mortgage debt in the first quarter. The slow, but steady, trend of homeowners moving back into the black has quietly become an impressive story, with 44.9 million homes now reporting equity, or 90 percent of all mortgaged properties, according to CoreLogic data. Not only does this kind of environment breed confidence, it also creates stability as homeowners are not struggling to make payments on an underwater home or biting off more than they can chew.
4. Home Loans. The Mortgage Bankers Association reported in its latest weekly survey that applications from prospective borrowers were up 8.4 percent on a seasonally adjusted basis. The American Bankers Association said in its recently released annual survey that loans to first-time homebuyers have ticked up to 14 percent, the highest level in the history of the 22-year-old survey. More applications and loans are great, but it’s also crucial to note that the quality of those loans is strong, too. Consider the number of loans in foreclosure are at
   the lowest level since November 2007, with just 1.4 percent of mortgages in distress.
5. Home Construction. While housing starts pulled back a bit in May, it’s important to remember that came after a red-hot April that shows big optimism for homebuilders as they broke ground on new homes at an impressive clip. The latest numbers showed upward revisions to the past two months, too, after impressive numbers previously. Also, permits surged 12 percent to the highest level since summer 2007 to show strong momentum that should carry this trend of robust construction through the coming months.
6. Builder Confidence. The National Association of Home Builders reported that builder confidence rebounded after a slow start to the year, and up to a nine-month high. Not only did this top expectations, but it put the NAHB survey firmly in expansion mode, with a reading of 59; anything above 50 signals a favorable view. Furthermore, expectations of sales now and in the future “are at their highest levels since the last quarter of 2005, indicating a growing optimism among builders that housing will continue to strengthen in the months ahead,” according to the NAHB.
7. Housing Supply. There is plenty of room for new supply, too, considering that Federal Reserve data show the current inventory of existing homes is only 4.5 months, down sharply from a one-year supply at the peak of the housing crisis and back in line with 2005 levels. The National Association of Realtors® reports that total listings are down 15.7 percent year-over-year.