Beyond the Numbers, Confidence Returns to Housing

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The housing numbers are all heading in the right direction. Home prices up, foreclosures down and, perhaps the most important, consumer confidence in housing swelling. Even as sales of new and existing homes bounce up and down month to month, the desire to buy is growing.

The percentage of Americans who say owning a home is an essential part of the American dream has hit a 3-year high at 79 percent, and the percentage who say it is better to own than rent grew by four points to 69 percent, according to the CNBC All-America Economic Survey. Perhaps the biggest surprise in the survey is that despite a raging, record-high stock market, more Americans believe a home is a better long-term investment than stocks.

(Read More: American Dream Is Back, So Are Stocks: CNBC Survey)

The gains can partially be attributed to a slowly recovering first-time home buyer cohort. First-time buyers have been lagging the recovery until now, making up barely a third of home buyers in February, compared to the historical norm of 40 percent. First-time buyers accounted for 34.5 percent of home purchase transactions in February, according to a new survey from Campbell/Inside Mortgage Finance. Even more encouraging is that traffic of these buyers is rising as well, hitting a four-year high on the same survey.

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"First-time homebuyers are the wildcard in the upcoming spring-summer home buying season," said Thomas Popik, research director for Campbell Surveys. "We see strong first-time homebuyer traffic, but it's still not clear that the traffic will translate into increased purchases, because first-time homebuyers are dependent on low down payment financing, such as FHA mortgages."

While first-timers are getting more interested, current homeowners are getting less interested, according to the Campbell survey. Meanwhile investor interest in housing rose to a four-month high, accompanied by a rise in sales of distressed properties. Investors, who largely buy all in cash, have been the main competition for regular home buyers, and as big hedge funds and private equity purchase lower end, distressed homes in bulk, that pushes prices drastically higher. Witness a 23 percent jump in Phoenix home prices in January, according to the latest reading from S&P/Case-Shiller.

While the number of distressed homes is falling, the remnants of the housing crash are still weighing on the recovery. There are still 5.1 million properties where the owner is either delinquent on the mortgage or the home is already in the foreclosure process, according to a new report from Lender Processing Services. As banks ramp up the foreclosure process, following delays due to processing fraud over the past few years, more distressed properties will come to the market. That may ease some of the price gains, although investors, still reaping rental rewards, seem ready for all of it.

(Read More: No Money? No Worries. Home Lenders Ease Rules)

What remains to be seen is for how long those rents will stay strong? With more Americans looking to buy and souring on renting, rent rates could start to come down. In addition, new supply of rental apartment buildings will be hitting the market in force over the next two years, as developers have been increasing multi-family housing construction.

(Read More: Defying Gravity: Miami Condos Soar Again)

—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

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