More than seven years have passed since home prices peaked and the mortgage credit crisis began to unfold in 2006, and Barclays (BCS) Securitized Products Research says real recovery isn’t in the cards yet in its “The Future of US Housing” report.

Barclays analysts, rather optimistically, say that since 2011-12, there has been a sustained recovery in the housing market.

Prices have risen by 20-25% since bottoming in first quarter 2012, although a lot of that activity hasn’t been because of individual homeowners but rather institutional and investor buyers.

After peaking during the crisis years, existing and new home sale inventories have also fallen below pre-crisis levels.

During this period, the US home-ownership rate has given back almost all of the gains made during the mortgage credit boom of the 2000s.

Home ownership has dropped from its peak of around 69% to the mid-60% area, which is the same level as we saw in the 1970s recession.

Barclays is optimistic on housing, in a way that other analysts aren’t.

Barclays concedes that despite what recovery we have seen, housing finance is still dependent on government.

“Although the housing market has rebounded after working through the excesses prevalent prior to 2008, mortgage finance has not,” the Barclays report states.

Analysts note that the share of government guaranteed mortgages (Federal Housing Administration, Fannie Mae, and Freddie Mac) has remained above 80%, while the private securitization market has remained mired in legacy issues, and increasing bank capital charges and rep and warranty put-back concerns have restricted the ability of private capital to compete with government-backed loans.

So what does Barclays say you need to know about the future of housing?

1) The housing market is rebounding, but housing finance has not

Even as the US housing market has rebounded sharply in the past three years, housing finance has not. The extent of government involvement in mortgage lending poses unacceptable risks to the taxpayer. Bank portfolio lending, private-label securitizations, covered bonds, and public/private partnership models offer alternatives to reduce reliance on the government guarantee, but they all come with their own limitations.  

2) Corker-Warner is the only likely GSE reform on the horizon

Among existing legislative proposals, the Corker-Warner bill is the most promising, and will likely be the template for any final legislation. It requires the first-loss piece to be backed by private capital but also provides an explicit government backstop in extraordinary circumstances. We estimate that $400-450bn of private capital is needed to absorb the credit risk of all $4-4.5trn in government- guaranteed GSE mortgages, assuming a 10% first-loss piece. The private markets cannot raise this amount easily. In our view, a government retreat will need to be spread over at least 10-15 years, not the five years proposed by Corker-Warner.

Click below for two more things Barclays foresees.