(FORTUNE Magazine) – Ah, spring, when youngish men's and women's fancies turn to . . . real estate, of course. Happily, the blizzards and floods that depressed home sales and new construction in recent months disguised a fundamentally improved nesting environment. Conditions for buying, selling, and building homes all point to the most * active single-family housing market in more than a decade. The economic recovery is generating enough new jobs to overtake cuts at large companies. The National Association of Realtors figures that houses are more affordable now than at any time since the mid-1970s. Mortgage rates, a major element of the NAR index of affordability, have dropped more than a percentage point in the past year. At under 8%, they're the lowest in two decades. Home prices in most regions are rising modestly -- good news on two scores. Rising prices allay buyers' fears that their life savings will disappear into a black hole. And that important adjective ''modestly'' helps people qualify for mortgage loans because prices are not running ahead of incomes, as they did in the 1980s in California and the Northeast. Mortgage applications for home purchases are strong, and the University of Michigan survey of consumers finds that their view of homebuying conditions has hit near-record enthusiasm. Large builders are optimistic. The order book at Pulte Homes, which operates in 25 cities, shows that all its markets outside Southern California are healthy. Timothy Eller, president of Centex Real Estate Corp., the nation's biggest homebuilder, says he is concerned about recent dips in overall consumer confidence. But so far, he says, lower confidence hasn't hurt sales. A worry for all homebuilders is the surge in lumber prices during the past half year as the government restricted logging on federal lands to protect the spotted owl. Prices have come down some of late, but they are volatile and experts say it's impossible to tell what will happen next. The National Association of Home Builders says the rise in lumber prices, if sustained, would add $5,000 to the cost of a typical new $126,000 home. Still, association economists don't believe such an increase would seriously crimp construction this year because market conditions are so good. PRICES OF EXISTING single-family houses will rise about 5% in most parts of the country this year, predicts Jesse Abraham, economist at Freddie Mac, a major participant in the secondary-mortgage market. For both owners and buyers, he adds, that's ''a comfortable and nonspeculative increase over inflation.'' The national increase, however, will average just 3%, dragged down by further declines in California and a mere 1% increase in the Northeast. Prices edged up 2% nationally during 1992. Most analysts expect Southern California to struggle for the rest of the year because of continued job losses in defense and the migration of companies and people to lower-cost states. Prices in the region's more expensive neighborhoods, like Beverly Hills, fell 11% in 1992, bringing the three-year decline to 19%, according to price indexes compiled by Case Shiller Weiss Inc. based on repeated sales of the same houses. Karl Case, a partner who is also an economist at Wellesley College, says such declines create major uncertainties that will keep prospective buyers on the sidelines. In contrast, homes priced under $161,000 -- inexpensive by Los Angeles standards -- dropped only 4% last year and sell for as much as they did in 1989, suggesting that entry-level buyers priced out of the market for years are now taking advantage of low interest rates. In California as a whole, first-timers accounted for 45% of all sales last year, up from 41% in 1991 and 35% in 1989, according to Century 21 Real Estate Corp. Northeast pricing remains weak, but outright declines seem a thing of the past. The Case Shiller indexes show Boston prices up a couple of percent last year, less than inflation but the best performance in four years. (See box on the next page for why buying a house makes sense even if its rise in value trails inflation.) Anne Rendle of the Greater Boston Real Estate Board says buyers last year stopped making ''ridiculously low offers and sellers stopped holding out for their dream price.'' The result: record area sales of 10,789 units. Centex and Pulte Homes both view Southwestern and Mountain cities such as Denver, Phoenix, Dallas, and others in Texas as their strongest markets. Timothy Eller of Centex notes that these cities turned down in the 1980s before other regions and have since recovered. Perhaps the hottest real estate market right now is Boise, Idaho, where despite heavy snow, sales are running 8% ahead of last year and prices are up 14%, according to Marc Eesley of the local realty board. Employment has been soaring, he says, in part because Boise is a favored destination for companies leaving California. Rapid price increases don't necessarily make for a healthy market, however, as anybody who bought in Beverly Hills a few years ago can tell you. So don't overlook the muted success stories of the Midwest, where prices never jumped in the 1980s and so didn't plunge in the 1990s. In Gary, Indiana, the local realtors board reports prices up 8% last year as steel jobs stabilized and ! firms that supply the steel industry moved in. In Madison, Wisconsin, prices rose 7% and sales were the best ever. Peter Sveum, president of the real estate board, says Madison got a lift from small businesses relocating there to serve the state government, the University of Wisconsin, and local insurance companies. Expectations for a decent housing market may seem overblown if you glance at the demographics. From 1977 to 1979, the number of 25- to 39-year-old Americans increased by 3.5 million. Today, growth in the number of such prime potential homebuyers is zilch. But take a more penetrating look at the numbers. A lot of people who were scared out of the market by the recession in 1990 and 1991 are now getting their nerve back. Unmarried people, many of whom wouldn't even have entered the market in the late 1970s, are a significant force now, accounting for 30% of all house purchases in 1992, according to the Chicago Title & Trust Co. Baby-boomers starting families late will want more space. Other boomers will want to move up. Note that homebuyers last year weren't exactly from Generation X. Chicago Title says the average age of first-timers was 31, vs. 28 in 1976, and the average move-up buyer was 41, vs. 36. FORTUNE expects single-family housing starts to jump 10% this year to nearly 1.15 million units, the best since 1987. Further job and income gains should stimulate enough demand next year to lift starts above 1.2 million, the highest since 1978. Real estate experts predict sales of new and existing homes together will reach 4.4 million this year, the most since 1979. Bullishness does not extend to the apartment market, which remains overbuilt and underoccupied. Construction will pick up a little from a very depressed level, but only because population shifts do not exactly match the location of existing apartments. Still, all in all, the housing business is better than it has been for years.

BOX: OVERVIEW

-- Low rates and more jobs will bring out the buyers. -- Single-family starts head toward a 16-year high. -- Prices will rise 5%, except in California and the Northeast.

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART CAPTION: NEW GROWTH AHEAD FOR HOUSING

CHART: NOT AVAILABLE CREDIT: FORTUNE CHART/SOURCE: FREDDIE MAC CAPTION: WHAT WILL HAPPEN TO HOME PRICES IN '93