“The super cyclical housing market has turned and a strong recovery in new home sales is ahead,” the analysts wrote. “Over the last year, a number risks to the housing market have abated, giving us confidence that rising home prices will drive a three to seven year up-cycle in the US housing market.”

According to the report, home prices are rising already, particularly in markets that saw heavy deflation since 2006. While the industry closely watches the S&P Case-Shiller Index – which measures the three-month moving average of home prices and is reported on a two-month lag – the report says asking prices as measured by housingtracker.net (shown above) have steadily increased to nearly 4% year-over-year, showing that home price appreciation by both investors and consumers is just a few months off. And as long as affordability remains at “attractive levels” and mortgage lending doesn’t tighten, GS suggests that new home prices could rise by 9% to $255,000 from $233,000 currently, or 30-year mortgage rates could rise to 120 basis points to just under 5%.