Home Depot offered fresh evidence of a sustained U.S. housing recovery Friday, as it told investors that the company expects roughly 5 percent annual sales growth this year, the highest annual increase since the Great Recession. The company said that the housing market is now in “stage two” recovery, with loosening credit, greater home turnover and normal levels of housing construction, after years of tight home financing and an excess supply of homes.

“People who can finally buy are buying, and a lot of those houses had to be refurbished,” said Patty Edwards, managing director for investments The Private Client Reserve of U.S. Bank in Seattle. “They’re spending more on home goods, home improvement.”

Home Depot reported 2.8 percent annual sales growth in 2010 (pdf), then the first year of positive growth since 2006. The company ended 2011 with 2.5 percent sales growth and achieved 3 percent growth in 2012. In 2013, sales grew 3.8 percent, to $78.8 billion, according to Home Depot’s latest annual report.

Homebuilders have been reluctant to start new projects for fear that the number of foreclosing homes will keep prices down, and many homeowners are hesitant to sell their homes until prices rise further. Home prices are still more than 15 percent below their 2007 peak, but they are growing at about 3 percent a year, according to the S&P Case-Shiller index.

According to IHS Global Insight, housing starts and building permits are expected to pick up modestly in September, to 978,000 and 1.026 million annual rates, respectively. More than half of overall construction activity is popping up in the South. The Census Bureau will report housing starts Oct. 17.

According to Harvard’s Joint Center for Housing Studies, which Home Depot cites, “solid growth” is expected in the home remodeling market this year.