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RENEE MONTAGNE, HOST:

In the U.S. economy, one of the brighter spots is actually the sector which led us into recession, and that's housing. Homebuilding is at its highest level in nearly four years. More homes are selling, and at higher prices.

The question is whether this is a solid enough foundation to sustain a full housing recovery.

Here's NPR's Yuki Noguchi.

YUKI NOGUCHI, BYLINE: According to Lawrence Yun, housing woes are largely behind us.

LAWRENCE YUN: It's been a harsh downturn, but the downturn is over. Now we are beginning to turn the corner. The question is: How fast will we be turning that corner?

NOGUCHI: Yun is the chief economist for the National Association of Realtors. He points to increased home sales, rising rent prices and low interest rates among several reasons why he's certain the housing market is pointing the right direction.

YUN: And then we have very low inventory condition which is implying that the price increases will surely be sustainable.

NOGUCHI: Yun says it may be counterintuitive, but in places like Las Vegas, Phoenix and Southern California, the number of homes for sales is at a fraction of where it should be in a normal market. And the competition among buyers is fierce. And, he says, this housing recovery isn't just regional.

Across the country, demand for homes is driven by investors, as well as millions families who put off buying a home in recent years until the market started to improve.

GLENN KELMAN: It's a self-reinforcing process, where the increase in housing market activity begins to boost consumer confidence about home buying.

NOGUCHI: Glenn Kelman is the CEO of online brokerage Redfin. He says he shares in some of that confidence.

KELMAN: We've been a bear, and now we're a bull.

NOGUCHI: To be more accurate, he says they're a small bull - a calf, maybe - on the market. That is in spite of the fact that some people believe there's a vast backlog of foreclosed homes that are about to hit the market. Kelman's not buying it.

KELMAN: Every conspiracy theorist in real estate believes there's a huge chunk of inventory that the banks are just holding back, waiting for our hopes to rise so that they can dash them again, and I just don't believe it.

NOGUCHI: Kelman acknowledges there are still plenty of problems with the market - namely, about half of Americans can't qualify for a mortgage. So a middle class that could be snapping up deals often can't.

KELMAN: I don't think anyone believes we're out of the woods yet, but I do think that there's very little chance that the market is going to lose 10 percent, 20 percent and drag us back into the abyss.

NOGUCHI: Gary Shilling is a financial analyst and well-known bear on housing. He says the conventional wisdom - that the housing market is stable - is riddled with folly.

GARY SHILLING: You want to believe, yeah, yeah. Build it, they will come. Yeah.

(LAUGHTER)

NOGUCHI: Shilling says he doesn't buy the idea that millions of people have steady enough income to afford buying homes.

SHILLING: Household formation is very much determined by economic circumstances. And right now, they're very negative.

NOGUCHI: In other words, just because somebody wants to move out, ideally, doesn't mean that they can.

SHILLING: Yeah. That's right. They've got to have the ability. They've got to have the motivation. They've got to have the cash, the job, all these other factors.

NOGUCHI: Shilling is among analysts who believe there is a big inventory of foreclosed and delinquent homes lurking in the shadows.

In fact, last week, RealtyTrac said during the first half of this year, foreclosure activity was up in more than half of major markets. Shilling argues that when those properties hit the market, that will drive down home prices at least another 20 percent.

SHILLING: Probably in the next few quarters, we're going to see that the foreclosures pick up and that start to be dumped on the market, and it'll be a very different story.

NOGUCHI: He says we've seen blips of similar good data two years ago. Skepticism, he says, pays off.

Yuki Noguchi, NPR News, Washington.

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