The ever-optimistic National Association of Realtors (NAR) believes the worst housing downturn since the Great Depression is almost over.

Other housing organizations aren't nearly as effusive. So whether the 1.1 million-member NAR knows something the others don't or it is caught up in the fantasy that is part and parcel to the Disneyland experience remains to be seen. But either way, it said that price appreciation will return to the moribund housing market in 2012.

Speaking across the street from Disneyland, the "Happiest Place on Earth," at NAR's annual convention in Anaheim, Chief Economist Lawrence Yun said signs are developing that signal a "recovery occurring next year and continuing into 2014."

It won't be a great, robust expansion but rather a moderate, respectable recovery, Yun said at a press briefing. And spurred by a combination of population growth, a gradually improving employment picture and people anxious to leave their parents' basement and finally move out on their own, price appreciation should once again return to the market next year, the economist ventured.

Prices won't rise by much, he predicted; only 2% in 2012, 3% in 2013 and 4% in 2014.

That's not terrific for people who bought at the peak of the boom, many of whom have seen the value of their properties drop by a third, according to some estimates, Yun admitted. "It will be quite a long time for those people to see a full recovery," he told reporters at a press briefing. "But it's good for new buyers."

NAR, which calls itself "The Voice for Real Estate," is betting that the tight credit conditions that have been holding back buyers will ease enough next year to allow at least some to take advantage of the best housing affordability conditions in years.

Based on the relationship of home prices, mortgage rates and family income, housing affordability hasn't been this favorable since 1970, Yun said. And it should be almost as good again in 2012, when it will be the "second best year on record," second only to 2011.

"Our hope is that credit restrictions will ease and allow more home buyers to take advantage of current opportunities," he told reporters. "If we could maintain sound and reasonable mortgage underwriting standards, the market would be able to avoid a future big boom and bust cycle."

Sales Falling Through Twice as Often

In the same convention, NAR said that sales contracts are falling through at twice the rate of last year, according to new figures released by the NAR at its annual gathering.

NAR said 18% of its members reported "contract failures" in recent months, which is double the level of a year ago. The two main reasons: Would-be buyers' applications for credit are being declined, and appraisals are coming in at below the agreed-upon price.

Even buyers with good credit are challenged by tight lending restrictions, said Chandra Hall, a Colorado Springs Realtor who led a session on how to crack the credit code.

NAR's analysis found that the average score for buyers using conventional financing rose from 717 in 2007, to 760 in 2010. Weighted average FICO scores for conventional loans purchased by Fannie Mae and Freddie Mac eased a bit in this year's second quarter, declining to 755, but remain well above historic norms, the realty group said.

Almost three out of every four loans were offered to buyers with scores of 740 or higher, while less than 1% were offered to those whose scores were 620 or lower, NAR said. Twenty-five percent of Americans have credit scores below 599 — almost double the level of two years ago.

The stiffer mortgage requirements have come at a time when banks are seeing strong profits and run counter to the government's efforts to use rock-bottom interest rates to get the economy and the housing market moving again, Yun said.

"We need to get back to reasonable lending standards," said Ron Phipps, the outgoing president of the 1.1 million member trade group.

The convention featured two separate educational sessions on the importance of credit scores and how to improve them, the one by Hall and another by JoAnn Sworan of Real Estate CSO, a Lemont, Ill., a credit repair company established to educate consumers, Realtors, and lenders.

During her session, Sworan said would-be buyers should be advised to check and begin monitoring their credit reports at least six months before they ever meet with a loan officer. The difference between a 720 score and 620 could be 140 basis points, resulting in raising the payment on a $300,000 mortgage $253 a month, from $1,436 to $1,689.

"It's imperative to know how credit scoring works and how to achieve the highest possible score," Sworman told the conference.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.