The economy is on the path to recovery. Consumer confidence has reached its pre-recession levels and the unemployment rate is expected to fall from 6.7 percent in 2014's first quarter to 6.2 percent in 2015's fourth quarter. What's more, big ticket items like motor vehicles and home furnishings are selling at a faster pace than in years past. If the high prices of these big ticket items are not scaring consumers away, then neither should the prices of real estate.

Supply and Demand
Young buyers who rented or lived with friends during the down-turn are now in better positions to apply for mortgages. But buyers should move quickly. Prices are expected to continue to climb throughout 2015. Inventory is in short supply in many parts of the country, and with fewer homes on the market, competition among buyers is high. That competition is also driving home prices up. The national median existing-home price will rise between six to seven percent by the end of the year, according to the National Association of Realtors' economists.

New Home Construction
The shortage of new inventory could be eased by new home construction. And according to the National Association of Home Builders, the industry is on the rebound. Early 2009 saw housing production nationwide drop to 27 percent of normal. By the first quarter of this year, production rose to 45 percent. Single-family housing starts will climb to 70 percent of normal by the end of this year and 93 percent of normal by the end of next year; housing starts should total 1.15 million this year and 1.35 million next year. However, NAHB economists believe that rising material costs and a lack of both available lots and workers will put downward pressure on the housing market, as will tight consumer credit.

Pending Contracts
The Pending Home Sales Index (PHSI) climbed to 97.4 in March. While the index rose 3.4 percent from February, it was down 7.9 percent year-over-year. In the Northeast, the PHSI rose 1.4 percent; yet despite the rise, the index was still 5.9 percent lower than March 2013. The index also saw a month-over-month increase in both the South and the West of 5.6 percent and 5.7 percent, respectively. The South dropped 5.3 percent below March 2013, and the West declined 11.1 percent from a year ago. The Midwest was the only region of the country that saw the index drop from February to March; the index slipped 0.8 percent to 94.5, a drop of 10.1 percent from March 2013.

Pay More Interest
Mortgage interest rates are expected to reach five percent by the end of 2014. And by December 2015, rates should top out at six percent. Despite the rise, five and six percent are still considered low by historical standards.