With the blooming forsythia of spring come the first fragile signs of life in the moribund residential real estate market. Nationwide, sales of new homes surged 16.2 percent in February, the biggest gain in nearly five years. Existing home sales for the month registered a 7.9 percent increase -- another five-year record.
The March numbers aren't yet out, but surveys by the Mortgage Bankers Association and the National Association of Home Builders suggest sales of entry-level homes, those typically purchased by first-time buyers, continued upward in March. Mortgage applications, buoyed by heavy demand for refinancing, are coming in twice as fast as they were this time last year. Housing prices are at their most affordable levels in 14 years.
If the pattern continues, and many economists believe it will, a housing revival could be the engine that leads the economy out of recession since it typically spurs spending on furniture and appliances. And there are other promising signals: consumer confidence is on the uptick after the gulf war; retail sales are up, and inflation is falling. An easing of the money supply by the Federal Reserve has fueled rapid money-supply growth and short- and long-term interest rates are down markedly from fall 1989 levels.
But this suspected turnaround is by no means assured. Unemployment is inching upward and factory orders, a barometer of future manufacturing activity, fell in February for the fourth straight month. Of equal concern is the credit drought that could short-circuit building and export activity. And while local Realtors report a marked increase in traffic, the market is still lagging. Sales contracts on existing homes in the Baltimore metropolitan area, while an improvement over previous months, were off 11 percent in March.
"The big story for the nation and the region is, what will this recovery look like, how long will it last and how fast will the growth be?" said Charles McMillion, a senior fellow at the Johns Hopkins University Institute for Policy Studies.
Still, the local and national economic pulse, strengthened by what looks like a rebound in the housing market, is at its strongest point in quite some time. The recovery may not be imminent but there at least are a few reasons for optimism.