The U.S. housing recovery is real and underway. The end-of-year numbers are in for the primary housing measures. Existing home sales were up 9 percent in 2012 from 2011; new home sales were up 20 percent in 2012 from a year earlier and housing starts were up 27 percent this past year compared to the previous year.

Granted, these advances were based off historically low bases but we will take what we can get after six years mired in a housing recession. Perhaps a more telling statistic for the nation’s housing outlook is appreciating home values. Over the past six months, home prices increased between 4 and 9 percent, according to the major home price indexes.  Lean housing inventories (both existing and new home supply are below 5 months) combined with fewer distressed homes for sale, portend favorably for future gains in home values.

The drivers of housing demand are in place for a sustained recovery: high affordability; job growth (albeit modest); strong investor demand;  rising buyer confidence; lean home inventories; home price appreciation; and fewer distressed homes for sale. However, there are two factors that stand out that could influence the housing outlook.

Foreclosure Situation

Overall, foreclosure filings and inventories are declining, an indication that most states have worked through the bulk of their foreclosure problems, reducing downward pressure on home values. Foreclosures are down 18 percent year over year. However, an agreement between the Federal Reserve/Comptroller of the Currency and the ten largest mortgage servicers in the nation is expected to generate a mini-wave of foreclosures in the near term, exerting some downward pressure on home prices. The agreement marks the end of the robo signing scandal and permits servicers to halt the burdensome review process on mortgages that were foreclosed in the 2009 to 2010 period in exchange for $8.5 billion to eligible homeowners, including a $3.3 billion payout to borrowers and the remaining funds going to loan assistance