Home prices probably will start to gain in 2011's third quarter, according to an article today at Bloomberg News by Kathleen M. Howley, "and rise 0.6 percent for the year, the first annual advance since 2006, according to Fannie Mae, the largest U.S. mortgage buyer."

"Real residential investment, an inflation- adjusted measure of homebuilding," the article continued, "will increase 9.6 percent in 2011 after five years of declines to a record low, based on the median forecast of 30 economists at a Federal Reserve Bank of Chicago symposium last month."

The article reported that Karl Case, the co-created of the S&P/Case-Shiller Index that tracks U. S. Home Prices, said that "there's a good chance of a housing turnaround this year, but it's not going to be enough to give much help to the economy," adding that "we're coming off 50-year lows and we still have to deal with the foreclosure mess."

The article said that Mark Zandi, chief economist for Moody's Analytics Inc., said that "lender delays in pushing through foreclosures may be the biggest challenge to a broader recovery," but the article also noted that "housing demand may be stabilizing after transactions plunged last year" and that "home sales and construction will rise in every quarter of 2011, according to estimates by the Mortgage Bankers Association, the National Association of Realtors, Fannie Mae and Freddie Mac."

"The problems that have come to light in the legal process have the potential to cause more foreclosure delays," Mr. Zandi said, adding that "By the end of this year, the housing crash could be over, or, if we see foreclosures pushed into next year, we might not see a recovery until the end of 2012. It's very difficult to gauge how it will play out."

"The economy probably will see a positive contribution from housing this year, but a very small one," said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. "Even if construction were to decline further, it would only have a small effect because it is such a small share of the economy at this point."

Sales of existing homes may reach an annualized pace of 5.23 million by the end of the year, up 10 percent from the current quarter, according to a forecast posted on the website of Washington-based Fannie Mae. Existing home sales probably slid to a 13-year low of 4.82 million in 2010, the company said.

Sales of new homes may have dropped to 321,000, the lowest in Census data going back to 1963, the company said.

The National Association of Realtors' affordability index, a gauge of median income against home prices, reached an all- time high of 184.5 in November, the article continued, adding that "the number of new homes available for sale dropped to a 42-year low in that month, while the inventory of previously owned homes on the market fell to 3.7 million, the third consecutive decline, according to data from the Commerce Department and the Realtors group."

Even with the foreclosure crisis, a real estate recovery may accelerate if the world's largest economy continues to expand, said Case, the co-founder of the home-price index and professor emeritus at Wellesley College in Wellesley, Massachusetts. While housing won't be much help to GDP this year, gains in jobs and income will expand the number of eligible homebuyers and bolster confidence, he said.

Gross domestic product grew at a 2.6 percent rate in the third quarter of 2010, up from 1.7 percent in the prior period. The unemployment rate fell to 9.4 percent in December, the lowest since May 2009, the Labor Department reported last week.

"If the economic recovery keeps going and unemployment keeps improving, it's a mood changer," said Case. "It's possible we could see people get off the fence and get back into the market."