The ailing housing market is perking up after rising home prices and mortgage loan rates made homes too expensive for too many buyers. The spring selling season should be decent, as the market emerges from a particularly tough winter. The two tailwinds that stand to lift sales: Mortgage rates have eased, making it easier for buyers to afford the monthly payments on a loan.

Expect rates to stay near current levels this spring. New listings are finally growing moderately, for the first time since 2013. Until recently, listings were flat or declining. The growing ranks of buyers were chasing a shrinking pool of available houses, pushing prices into nosebleed territory in some areas.

New-home sales will rise a bit this year. Sales of existing homes will stop sliding and come in flat…not a spectacular performance, certainly, but still an improvement from last year.

Home prices: Up 4%, on average…a bit less than last year’s 5.1% and more palatable for buyers. First-time buyers can expect more options. Especially in the townhouse market. Builders see townhouses as a quick way to put up cheaper homes. Townhouse construction will rise by a brisk 24% in 2019. Those looking for new single-family homes will have to pay up. The price gap between new and existing homes is unusually large right now, except in the West.

Home renovation spending: Up only a tad this year after surging last year. Despite the improvements, the market will remain tight, with too few homes relative to the number of would-be buyers, and prices still out of reach for many folks. Mortgages are still tough to get for borrowers with weaker credit scores.

The median FICO score for a mortgage is 30 points higher than the prerecession level. (Some housing markets where a weaker score is less of a hurdle to getting approved than is normally the case: San Antonio and Fort Worth, Texas. Orlando, Fla. Atlanta.) The outlook for lenders isn’t rosy. A modest uptick in new loan originations isn’t enough to offset the sharp drop in mortgage refinancing over the past few years.

Banks like Wells Fargo and J.P. Morgan face more competition from nonbank lenders. The slump in lending to home builders isn’t over, either. Very tight credit is making it especially difficult for small builders to purchase and develop vacant lots. The housing market’s biggest long-term worry: Slow household formation. The huge millennial generation is aging into its prime home-buying years. However, many 20- and 30-somethings are marrying later, moving out of apartments later, or living with their parents longer, keeping a lot of potential demand off the table.

All information above is from the Kiplinger letter. You can subscribe by clicking here >>