US housing market recovery picks up
19 September 2012 by Veronica Smith
The recovery in the US housing market continues to strengthen, data released Wednesday showed, a key improvement in the struggling economy just seven weeks before the presidential election.
The National Association of Realtors said that sales of so-called "existing", or previously occupied, homes, jumped 7.8 percent from July, the highest pace since May 2010, and were up 9.3 percent from a year ago.
Prices increased the most in more than six years. The median price, the middle point between the top and bottom prices, rose to $187,400, up 9.5 percent year-over-year.
"The US housing recovery is for real," said Sal Guatieri, senior economist at BMO Capital Markets.
"Great affordability, pent-up demand and strong investor interest in rental units are driving the market, and QE3 can only help by reducing mortgage rates further."
Signs of life are welcome in the housing sector, where millions of Americans have tied up their savings only to see them evaporate when a price bubble burst in 2006, leading the economy into the Great Recession.
They come as President Barack Obama grapples for re-election on November 6 in a tight race against Republican rival Mitt Romney, with economic issues at the top of voters' concerns.
A separate report from the Commerce Department showed housing starts rose 2.3 percent from July, and were up 29.1 percent from the August 2011 rate.
Starts on single-family homes jumped 5.5 percent.
New building permits, an indicator of future homebuilding, fell 1.0 but were 24.5 percent higher than a year ago, the department said.
Last month it reported new-home sales surged in July to their highest level since April 2010. The August numbers are due next Wednesday.
Homebuilders waxed optimistic. On Tuesday, the National Association of Home Builders said its NAHB/Wells Fargo sentiment index rose for a fifth straight month to its highest reading since June 2006.
Even so, home prices remain about 30 percent below their 2006 peak and roughly 15 percent below their August 2004 level. Barclays analyst Michael Gapen cautioned that the housing recovery still faced significant challenges.
"Our view is that housing is in a recovery phase, but one that will be restrained by the availability of credit, the pace of improvement in labor market conditions, and the overhang from distressed and foreclosed properties," he said.
The US central bank last week rolled out its biggest stimulus in two years, QE3, in part to boost home building and buying, and fight high unemployment in the aftermath of the Great Recession.
Federal Reserve Chairman Ben Bernanke said the QE3 program -- purchases of mortgage-backed securities at a pace of $40 billion a month -- should help lower interest rates, particularly on mortgage rates which have been hovering at historic lows.
QE3 "should provide further support to the housing sector by encouraging home purchases and refinancing," which in turn would help the economy grow, Bernanke said.
IHS Global Insight economists Patrick Newport and Michelle Valverde predicted that existing-home sales would climb 7.0-10.0 percent this year, but stressed that would be "from very low levels."
"Normal conditions are still at least a couple of years away," the analysts said.
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