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BIRMINGHAM, AL—There's a shift taking place in the private-home market, that perennial bellwether of commercial real estate's success. According to Jay McCanless, an equity analyst at locally based Sterne Agee, which is now pumping out industry analysis of that market sector, consumers are coming back and they will be fueling a housing price jump throughout the year.

The firm is tracking a year-over-year increase in mortgage and insurance applications and housing permits—all, says McCanless, signs of a market that is back from anemia. “These indicators are the backbone of our thesis that retail/consumer buyers are returning,” he says in the firm's multifamily report.

The return of private buyers, he commented in a follow-up interview after the release of the report, will overshadow the institutional players. As a result, “We expect the competition between consumers and institutions for a tight supply of homes may push prices above current levels.”

Sterne Agee's coverage encompasses 25 MSAs that embrace 80% of the communities of homebuilders the firm tracks. This includes such names as Toll, Lennar, KB, Pulte and Beazer. The MSA with the highest number of communities is Houston, at 291. Rounding out the Top Five are: Dallas/Fort Worth (207); San Antonio (171) Orlando/Kissimmee (142); and Washington, DC/Alexandria, VA (136).

Further fueling the coming spike in prices is a dwindling inventory in those MSAs. “The average available housing supply in those MSAs has declined below six months of inventory and is at levels where we believe sellers of all stripes can raise prices,” says the report. “Our coverage is attempting to fill that housing gap, and we expect housing permit and housing start growth could remain positive for several years as a result.

“We believe industry fundamentals are the best since the beginning of the last upturn in 2002,” the report continues. For those homebuilders with a prediction of growing their communities, positive growth is ahead.