Confidence among U.S. builders ticked up this month to a five-year high, an indication that the housing market is slowly improving.
The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 29, the highest reading since May 2007. It increased from a reading of 28 last month, which was revised down one point.
The index, which was released Monday, has risen in seven of the past nine months. Still, any reading below 50 indicates negative sentiment about the housing market. The index hasn't reached that level since April 2006, the peak of the housing boom.
In June, builders reported seeing the best sales level since April 2007, according to a separate measure in the survey. Their outlook for sales in the next six months, however, hasn't changed from May.
The modest improvement among builders follows other signs that suggest the housing market could be slowly starting to recover.
In April, sales of both previously occupied homes and new homes rose near two-year highs. Builders are breaking ground on more homes and requesting more permits to build single-family homes later this year.
Cheaper mortgages and lower home prices in many markets have made homebuying more attractive. Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005. Jennifer Lee, senior economist for BMO Capital Markets, said that the June reading on builder sentiment was welcome news. She said that even with recent weak readings on employment, the builders' outlook for sales over the next six months did not decline and foot traffic remained the same.
Still, the pace of home sales remains well below healthy levels. Economists say it could be years before the market is fully healed.
Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks. Some would-be homebuyers are holding off because they fear that home prices could keep falling.
The economy is growing only modestly and job creation slowed sharply in April and May. U.S. employers created only 69,000 jobs in May, the fewest in a year.
Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to Home Builders' data.
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The tide is already starting to turn in some U.S. housing markets, with home prices in these 10 metro areas expected to climb anywhere between 10 percent and 21 percent by the end of next year, according to Fiserv.
Median home price: $248,000
Drop since market peak: 17.1 percent
Forecast gain through 2013: 10 percent
Santa Fe not only has cleanest air in the nation, but it also should see some healthy gains in home prices as well, according to Fiserv.
This state capital in the high (located 7,200-feet above sea level) country of central New Mexico wasn't hit half as hard by the housing bust as some other parts of the nation. Helping to lift prices is Santa Fe's thriving economy.
With a population of just under 200,000, unemployment is at a low 5.5% making it one of the top 10 metro areas for jobs. The city is also attractive for other reasons: It's a center for visual and performing arts, with a major dance company and the famous Santa Fe Opera.
Median home price: $149,000
Drop since market peak: 7.5 percent
Forecast gain through 2013: 10 percent
Lewiston's location on the banks of the Clearwater River, where major oceangoing ships can easily reach the town, has made it an attractive place for manufacturers to set up shop.
And while the production of everything from paper to ammunition still drives much of the economy, it is starting to diversify into other areas, including medical services.
That has helped the town maintain economic stability, and buffer the housing market from the nationwide collapse in home prices, according to Steven Peterson, an economics professor at the University of Idaho.
The median income of $55,600 is less than the national median -- but the cost of living is low as well. Staples like food and utilities cost about a third less here than in high-priced metro areas.
As the national economy recovers, Lewiston's industries, especially the timber companies and shippers, should start adding jobs. Already, at 7.3 percent in March, the area's unemployment rate is nearly a percentage point below the national average. And, since the housing market was not overbuilt, demand for homes should start to push prices up.
Median home price: $176,000
Drop since market peak: 3 percent
Forecast gain through 2013: 10.1 percent
Located on a rolling prairie, 600 miles from any city near its size, Billings' isolated location is the key to its prosperity, said Century 21 real estate broker Mark Dawson.
Residents of the vast surrounding area flock to the city's retail stores, hospitals and its airport. In addition, many of the workers come through Billings on their way to jobs in the oilfields of North Dakota.
Those factors have kept the housing market strong throughout the bust. Home prices in Billings are down just 3 percent from the 2006 peak. As a result, fewer homeowners are underwater on their loans and foreclosures have been a rarity, said Dawson.
Last fall, home sales started picking up and now the one time glut of high-end homes costing more than $400,000, has dried up. With inventory low, home building is starting to percolate. Dawson said the number of homes built by developers grew 112 percent during the first quarter compared with 12 months earlier.
Median home price: $118,000
Drop since market peak: 36.9 percent
Forecast gain through 2013: 11 percent
Boise's housing market has gone through a dramatic rise and fall over the past decade.
Home prices almost doubled in the five years leading up to 2006. But once the bubble burst, prices plunged, according to Fiserv.
Some neighborhoods were flooded with foreclosures and the metro area had one of the higher foreclosure rates in the nation in April, according to RealtyTrac. All of those distressed properties should start to attract bargain hunters, including investors, said Steven Peterson, a professor of economics at the University of Idaho.
There are plenty of reasons for buyers to stay here. Boise has a diverse economy that includes software makers, medical services and agricultural support companies like J.R. Simplot. Chip maker Micron Technology is also based in Boise.
The unemployment is just a tick above the national rate at 8.2 percent and has dropped a full percentage point over the past 12 months.
"The road back to housing market recovery is less steep [in Boise] than in high-cost areas," said Peterson.
Median home price: $211,000
Drop since market peak: 26.3 percent
Forecast gain through 2013: 11.3 percent
Located between Seattle and Portland, this state capital offers both jobs and state-of-the-art health care.
The state government and medical facilities, like Providence St. Peter Hospital and Columbia Capital Medical Center, are among the largest employers in the area, said Thurston County Economic Council executive director Michael Cade. While Lewis McChord, a nearby military base, employs thousands of civilians and supports many of the small businesses in the area.
With the median household income at nearly $75,000, residents are better able to afford home prices here, which are about 50% higher than the rest of the nation.
And they're still rising. Fiserv expects home prices to take off by the fourth quarter and climb by 11.3 percent in 2013.
Median home price: $166,000
Drop since market peak: 21.2 percent
Forecast gain through 2013: 12.4 percent
Like Corvallis, Eugene's comeback is partly being fueled by the fact that it hosts a big university.
The University of Oregon brings a steady supply of students, many of whom stay in the area post-graduation.
However, earnings here are not very high. Household income in the Eugene area is about $53,000, about $13,000 below the national median.
Still, homes are selling -- just not at the high-end of the market, said John Hoops, a former president of the Oregon Association of Realtors and a broker with Windermere Real Estate.
"On inventory under $200,000 we're seeing multiple offers," said Hoops. Sales of properties near the university are especially strong with some of the demand coming from investors who rent out properties to students.
Median home price: $224,000
Drop since market peak: 11.4 percent
Forecast gain through 2013: 13.2 percent
The economic fortunes of the Corvallis area are closely tied to Oregon State University, which not only hires a lot of workers but has also spawned a handful of local businesses.
Recently, the local economy has been on an upswing. The unemployment rate has fallen by nearly one percentage point in the past year to 6.1 percent. And enrollments at the university climbed by 8 percent and 5 percent over 2010 and 2011, respectively, boosting demand for rental units.
That has created an opportunity for real estate investors, who are buying up homes priced below the median level and renting them out to college students, said Jimmy Yang, an associate professor of finance at Oregon State
Supply is limited though, according to Stuart Conser of Conser Realty. Smart growth initiatives aimed at preserving open spaces put limits on development in certain parts of town. With fewer new homes being built, it should put upward pressure on pricing.
Median home price: $105,000
Drop since market peak: 37.4 percent
Forecast gain through 2013: 16.7 percent
Yuma can thank its location for helping it recover from the housing meltdown. The Arizona town sits in a Foreign Trade Zone, where products and materials can be moved between Yuma and Mexico duty-free.
And the nearly constant sunshine also makes it a center for renewable energy development, with companies like First Solar and Abengoa Solar hiring hundreds of workers, according to Julie Engel, director of the Yuma Economic Development Corporation.
Agriculture is another major industry here, especially due to the long growing season.
All that is helping, but the economy is still struggling. The area has one of the nation's highest unemployment rates, nearly 24 percent in March. And median household income of just over $45,000.
A structural problem for the economy is that it's seasonal with agricultural workers often facing months of idle time, according to Moody's Analytics. The workforce also tends to be poorly educated with only 15.9 percent holding a bachelor's degree or higher, according to the Census Bureau.
Yet, home prices are so cheap that the vast majority of families earning the area's median income can afford a home, according to the National Association of Home Builders.
Median home price: $144,000
Drop since market peak: 37.1 percent
Forecast gain through 2013: 20.1 percent
A hot spot among retirees, this small city located just north of the California border is staging a comeback.
"We now have the lowest [housing] inventory in six years and the strongest buyer traffic in seven years," said Colin Mullane, a real estate broker at Full Circle Real Estate in Medford.
Homes are selling at a quicker pace and at higher prices than they did over the past several years, according to the local multiple listing service. Another promising sign: more distressed properties are being sold in short sales rather than going into foreclosure.
One factor could hinder the housing market recovery, however: unemployment. In March, unemployment stood at 11.7 percent, well above the national average.
But a steady influx of retirees should help. According to Mullane, many seniors are drawn to the area for its mild Mediterranean-like climate, excellent medical facilities and reasonable cost of living.