Salient to Investors:

JPMorgan Chase now predicts US home prices will rise 7 percent in 2013 and over 14 percent through 2015, and Bank of America predicts prices will now rise 8 percent in 2013 as homebuyers and investors rush to acquire a dwindling supply of properties and the Fed lowers mortgage rates.

Samantha McLemore at Legg Mason says we are in the early innings of a prolonged recovery in housing and the economy.

The NAR say the number of homes for sale are the fewest since December 1999.

John Sim et al of JPMorgan said housing and economic indicators are showing resilience and estimates home prices will increase 3.9 percent in 2014 and 3.2 percent in 2015, while reaching for yield is now firmly grounded in the housing market.

 Freddie Mac says the average rate for a 30-year loan is 3.63 percent, a six-month high, versus the record low of 3.31 percent in November 2012 and 6.8 percent in July 2006.

Michelle Meyer, Chris Flanagan and Justin Borst at Bank of America say low interest rates, a tight supply, and record affordability has triggered a positive feedback loop, where rises in home prices fuels expectations of further rises and easing credit conditions  which stimulates home buying. They expect gains in 2014 will moderate to 6.5 percent and 3.7 percent in 2015.

JPMorgan estimates that by the end of 2013, 10 percent of borrowers will be underwater versus 25 percent in 2011, and demand for non-performing assets will increase.

Bryan Whalen at TCW said if home prices rise anywhere close to these predictions we will see a further rally in non-agency residential mortgage-backed securities – in a more subdued recovery near-term total rates of return could be in the mid-teens but higher rises could see total rates of return of 20+ percent.

Eric Teal at First Citizens BancShares is bullish on homebuilding stocks as construction and new-home building get back to more normalized levels.

Mark Zandi at Moody’s Analytics said everyone knows that housing is kicking into gear but are underestimating the boost to the economy.

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