A variety of encouraging indicators suggest the housing market is awakening, “much like the garden flora reemerging from their winter dormancy,” Frank Nothaft, Freddie Mac chief economist said Wednesday.

In the agency’s latest economic outlook report, Nothaft predicts stronger economic growth in 2012 will translate to a reduction in the unemployment rate below 8.3%. He expects 30-year fixed-rate mortgages to gradually increase throughout the year to 4.5% and new rental construction to reach heights not witnessed since 2005 — if the current pace is maintained, that is.

Nothaft also said more neighborhoods might see stabilization in overall demand and housing values this spring.

Calling the latest home sales data “promising,” Nothaft referred to new and existing sales averaging 4.93 million in the first two months of 2012. “The improvement in housing demand over the past few months correlates with the exceptionally low mortgage rates…and the high affordability for potential homebuyers who have the financial means to purchase,” he said.

However, as an indication of the seemingly endless anemic demand for housing, the Mortgage Bankers Association reported Wednesday that mortgage applications fell 2.7% from a week earlier during the period ending March 23. Refinancing activity fell for the sixth consecutive week.

Nothaft cited the nation’s job creation, which remained above 200,000 in February for the third consecutive month, and a declining trend in unemployment.

“Even the housing market is showing some signs of shaking off the depression-like conditions that have plagued it for much of the past few years,” he said.

Housing starts averaged nearly 700,000 on a seasonally adjusted annual rate from November through February, up 19% from the pace over the prior 12 months. Last week, the Commerce Department reported that housing starts leaped 34.7% in February when compared the same month a year earlier.

The rise’s reflection appears in the National Association of Home Builders confidence index, inching up for the fifth straight month in February and holding steady in March at the highest level since June 2007. Although, confidence regarding market conditions among homebuilers remains low.