Wall Street investment bank Goldman Sachs ($163.32 -0.8255%) is telling clients that the housing recovery is real and happening.
The financial firm is predicting home sales will rise steadily for the next four years.
"Our forecast points to steady increases in home sales going forward. We expect total existing home sales to increase to 5.2 million in 2013 and 5.7 million in 2016," said analysts Hui Shan and Jari Stehn. "We also project new single-family home sales to reach 750,000 in 2016."
Click graph to enlarge:
"We project national house prices to rise 17% over the next four years and the unemployment rate to drop to 6.2% by the end of 2016," they add. "These improvements support more economic activity and housing transactions."
There are several limitation to their estimation. In the near term, the speed at which distressed sales will decline is subject to the changing legal landscape. For example, the California Homeowner Bill of Rights, which took effect in January 2013, provides homeowners more protection against foreclosures, the analysts said.
"To the extent that the reduction in foreclosures cannot be easily converted into other forms of distressed sales such as short sales, we may see fewer distressed sales, and therefore, fewer total existing home sales," write the analysts.
In the medium term, homeowners who move from negative equity to positive equity may still be unable to move locations. This creates a locked-in risk for homeowners and could negatively impact the above estimations.
Don’t miss out: get HW delivered via email