Despite strong signs of recovery, the level of housing activity remains near historic lows, according to the February housing outlook by Freddie Mac.

Reports of low home prices, low mortgage rates and modestly rising income indicate that there is room for sustainable growth in the year ahead.

Additionally, residential-fixed investment made positive contributions to GDP growth for the first time since 2005, adding 0.4% to growth in the fourth quarter.

“The macroeconomic recovery though 2011 helped to forestall further erosion in the depressed housing market. In return, housing is now ‘showing some love’ by contributing to economic growth, perhaps by adding close to 0.5 percentage points to 2013 GDP growth,” vice president and chief economist Frank Nothaft of Freddie Mac said.

Housing starts in 2013 are projected to increase to 950,000 units, a 22% increase from 2012. Looking even further ahead, Freddie Mac economists are forecasting another 26% in annual starts in 2013, bringing the total to about 1.2 million.

As incomes continue to pick up, so will home prices. The housing price recovery should have a direct effect on sales, as homeowners who have been forced to wait are now able to get back into the market.

Nothaft added, “Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates.”

Watch the video below to see Nothaft’s full outlook.

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