By Diana Olick, CNBC Correspondent NEW YORK ( CNBC) -- Economists are saying it, and now even some Americans are saying it. After falling to depths not seen since the Great Depression, the U.S. housing market may finally be rising from the ashes. It may not seem like a lot, but 27% of Americans believe the value of their homes will increase in the next year, according the CNBC All America Economic Survey. That is the highest percentage since 2007 and the third straight quarter that such optimism has gained.
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Positives, like record-low mortgage rates and much-improved affordability are offset by still high negative equity, tight credit conditions and continued uncertainty about the overall state of the economy. Just ten percent of those polled in the CNBC survey say the economy is good or excellent, with 91% saying it is only fair or poor. Fifty-three percent say it is poor, with 25% saying it will get worse. These sentiments are little changed from the survey results in June. Housing still faces some huge unknowns, including tough regulation on mortgage lending, the looming "fiscal cliff," and more than 5 million loans that are either delinquent or in the foreclosure process. Supplies of distressed homes are low, but much of that is due to delays in the foreclosure process which are just now beginning to lift. New mortgage delinquencies are falling slightly, but they are still far higher than historical norms. There is also a possible new headwind that few have mentioned. That is the potential loss of the Bush 2007 Mortgage Relief Act benefit. This act negates any tax liabilities against borrowers who do so-called "short sales." This is when the bank allows the home to be sold for less than the value of the mortgage. The debt that is forgiven (that is the amount of the mortgage not covered by the sale price) would usually be taxed, but this act put a temporary stop to that in order to give borrowers relief and stimulate the short sale market. This act expires at the end of this year, and Congress has yet to extend it. "Private investors, Realtors and banks have begun to drive short sales hard, as foreclosures take too long and are too politically sensitive," said housing analyst Mark Hanson. "The loss of the Bush 2007 Mortgage Relief Act benefit, which has been driving incremental short sale volume all summer -- and is responsible for a large part of the year-over-year increase in sales volume -- will drive sales volume into a "triple dip" in the winter/spring...Prices will get hit as well."
It is of course possible that Congress will extend the act at the last minute, but this is just one example of many "ifs" still present in the market. Mortgage rates may be low now, but some say they could move up next year, influenced by factors outside the Federal Reserve's recent attempt to lower them (QE3). Home prices appear to be improving, but a new flow of distressed properties could lessen those gains this fall. And again, so much still depends on jobs. S&P's David Blitzer may believe housing is back, but his colleague Robert Shiller said last week that he wasn't convinced. Suffice it to say, the housing market has come a long way, but it still has a long way to go. -- Written by Diana Olick at CNBC.