Get breaking news alerts via email

Click here to manage your alerts
(AP Photo/Mark Humphrey) U.S. builders started construction on more homes in August, driven by the fastest pace of single-family home construction in more than two years.
U.S. housing recovery gains momentum in August
Real estate » Sales and construction still below healthy levels
First Published Sep 19 2012 08:29 am • Last Updated Jan 07 2013 11:31 pm

Washington • A jump in sales of previously occupied homes and further gains in home construction suggest the U.S. housing recovery is gaining momentum.

The pair of reports Wednesday follows other signs of steady progress in the housing market after years of stagnation. New-home sales are up, builder confidence has reached its highest level in more than six years and increases in home prices appear to be sustainable.

Join the Discussion
Post a Comment

Sales and construction rates are still below healthy levels, economists caution. But the improvement has been steady.

And the broader economy is likely to benefit. When home prices rise, Americans typically feel wealthier and spend more — a point Federal Reserve Chairman Ben Bernanke made last week after the Fed unveiled a plan to lower mortgage rates. Consumer spending drives 70 percent of the economic growth.

"We have a real housing recovery taking root, and that has positive implications for the broader economy," said Sal Guatieri, senior economist at BMO Capital Markets. "If home prices continue to rise, so, too, will household wealth and consumer confidence."

Sales of previously occupied homes rose 7.8 percent in August from July to a seasonally adjusted annual rate of 4.82 million, the National Association of Realtors said Wednesday. That’s the highest level since May 2010, when sales were aided by a federal home-buying tax credit.

U.S. builders broke ground on 2.3 percent more homes and apartments in August than July. The Commerce Department said the annual rate of construction rose to a seasonally adjusted 750,000. The increase was driven the best rate of single-family home construction since April 2010.

Even with the gains, the market has a long way back to full health. Sales of previously occupied homes remain below the more than 5.5 million that’s consistent with a thriving market. In better economies, homebuilders start twice as many homes.

Strict credit standards and bigger down payment requirements have made it harder for many first-time buyers — who are critical to a housing rebound — to qualify for mortgages. The number of first-time homebuyers made up just 31 percent of the market in August. In healthier markets, the percentage is more than 40 percent.

For those who can qualify, the market is tempting. Mortgage rates are just above record lows. Prices, on average, are much lower than they were six years ago.

story continues below
story continues below

The Fed plans to spend $40 billion a month to buy mortgage bonds for as long as it thinks necessary to make home buying more affordable. Bernanke said the Fed will keep buying the bonds until the job market improves "substantially."

Many buyers today are investors who see a great opportunity in the improving sales trends and rising prices.

Count Chad Shade as one of them.

Shade, 27, a homeowner in Brea, Calif., wants to buy a condo for around $150,000 that he can turn into a rental property. He’s made offers on as many as six homes in the last three months. But he lost out every time to a rival paying cash.

"They seem to be selling like hotcakes," he said. "I just don’t see prices going much lower. It seems the housing market is starting to trend upward, and I don’t want to miss that train."

One challenge for buyers now is the limited number of homes on the market. There were 2.47 million homes available for sale in August, or 18 percent fewer than the same month in 2011.

Homes are selling more quickly than a year ago. The median amount of time that a home spent on the market was 70 days in August, the Realtors’ group said. A year ago, the median timeframe was 92 days a year ago.

And the limited supply has helped lift home prices. The median home price in August was $187,400, according to the Realtors’ group said. That’s slightly lower than July but 9.5 percent higher than August 2011 — the largest year-over-year price increase since January 2006.

Other surveys have also shown sustainable gains in prices, albeit much smaller. Core Logic, a private real estate data provider, said home prices rose 3.8 percent in the 12 months ending in July. The Standard & Poor’s/Case-Shiller index said last month that home prices rose in June on a year-over-year basis, the first time in nearly two years.

One reason prices are rising is there have been fewer foreclosures and short sales. A short sale is when the seller owes more on the mortgage than the home is worth. Distressed properties made up just 22 percent of sales in August, down from 31 percent a year ago. Those sales occur at steep discounts, which drag down overall home prices.

Chris Jones, an economist with TD Economics, said more foreclosures and short sales are likely. But rising prices should make homeowners with stable properties more willing to put their houses on the market. That will likely offset the drag on prices.

Next Page >

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.