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Realtor and bank-owned signs are displayed near a house for sale in Phoenix. Even though U.S. inventory levels of family housing appear to be improving, there are a vast number of foreclosed homes that will be hitting the market, which will further depress weak prices.

Most economists agree that the U.S. will not claw its way back to a sustained recovery until the job market improves markedly and the embattled housing sector stages a strong comeback.

The employment outlook remains as clouded as ever. But housing is producing enough mixed data to cheer both optimists and gloomsters. Last week's U.S. GDP report showed that residential construction rose in the fourth quarter by an impressive 10.9 per cent, compared with 1.3 per cent in the previous quarter.

And a key gauge of sentiment among home builders rose to its highest level since mid-2007, when more than a few experts were still insisting that subprime mortgages would not become a major problem for the industry.

But as the housing bears were quick to point out, much of the new construction is concentrated in what the industry calls multifamily dwellings – mostly rental apartments to meet growing demand from people who can no longer afford home ownership. Which helps explain why new home sales and prices remain at deep recession levels.

As for single-family housing, U.S. inventory levels appear to be improving. Listings fell nationwide in January by 17 per cent from a year earlier, according to HousingTracker, which monitors listings in 54 urban areas. But the supply always narrows in December and January. And the survey doesn't include the vast number of foreclosed homes still to hit the market. Many of them will do so this year, once various regulatory and legal hurdles are cleared, further depressing still weak prices. Average sales prices remain 30 per cent below the level three years ago.

The best that can be said about the U.S. housing market is that it has likely hit the bottom of the well and has nowhere to go but up from here. But the climb is sure to be a lot longer and more tortuous than the cheerleaders would have us believe.

In the Canadian market, by contrast, the worry expressed by the likes of the IMF and the Economist is a coming housing collapse. But the worthy economy watchers at BMO Nesbitt Burns Inc. assure us in a new report that there's nothing to worry about it.

"In our view, the housing boom will more likely cool than correct, even in condo-driven Toronto," they conclude.

All those investors still pouring cash into the Toronto condo craze fervently hope they're right. But given the amount of new construction, that could be one heck of a cooling.

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