Homes Sales Expected to Rise in 2011.

Housing economists expect the troubled residential market to begin picking up in 2011, with low mortgage rates and bargain home prices boosting sales in the spring selling season.

The economists, who delivered their forecasts on a panel at the National Association of Home Builders' annual meeting here, noted the market remains extremely weak, prices are still falling, and they don't expect any recovery to be robust. But they said a number of recent economic indicators have convinced them that housing sales, which have stalled lately, could soon begin to recover.

The economy is creating new jobs, holiday sales came in better than expected, and sales of cars and furniture have improved, noted David Crowe, chief economist for the NAHB. Those trends, he said, are "signifying growing consumer confidence."

After years of abysmal construction and sales activity, Mr. Crowe expects builders to start construction on 575,000 single-family homes this year, up 21% from last year. That would still be far below the 2005 peak of 1.7 million housing starts.

The NAHB also expects new home sales to hit 405,000, up 26% from 2010, as buyers who delayed purchases ink deals.

To be sure, the outlook for 2010 at last year's conference proved much too optimistic. At that time, the NAHB economist saw 610,000 single-family starts for 2010. The actual count, which isn't yet final, is expected to come in at 475,000.

But Mr. Crowe says this year will be better as more jobs are filled and more buyers leave the sidelines. "Consumers are finally willing to go forward," he said.

The outlook for home prices is less upbeat. Freddie Mac Chief Economist Frank Nothaft expects home prices to bottom in the first half of this year, and mortgage rates to edge up slightly, ending 2011 closer to 5.25%.

David Berson, chief economist of mortgage insurer PMI Group, believes prices will weaken further in the next few months, but end the year flat. Next year, he said in an interview, pricing will increase slightly.

It won't be until 2013 that there will be long-term sustainable gains at the historical average rate of 3.5%-4%, he said. Mr. Berson missed the panel as a result of weather-related travel problems, but provided his outlook in a phone interview.

Many of the 50,000 attendees at this year's builders conference are also cautiously optimistic, hoping that prices have come down far enough to pull buyers off the fence.

"People now have waited long enough and are tired of waiting," said Don Eyler, owner of E+R Construction in Indiana. "Right now, you can build a house for the same price as an existing one in some places."

Other builders questioned whether they would be in a position to benefit when any upturn occurs. "I've been a builder for 44 years," said Richard Jenkins, owner of R.J. Builders in Terre Haute, Ind. "Indiana has little dips and little valleys, but I've never seen anything like this before. In 1982, you could borrow money. You just had to pay the price for it. Now, you can't."

Story written By DAWN WOTAPKA And S. MITRA KALITA. Wall Street Journal

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