U.S. housing recovery gains momentum in August

Real estate » Sales and construction still below healthy levels

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"The market is picking up. There are a lot of non-distressed homes that are coming on the market," Jones said.

In the meantime, the lower supply of homes has boosted demand for new homes. That has made builders more confident in future sales.

Applications for building permits, a good sign of future construction, dipped in August to an annual rate of 803,000. Still, that’s down only slight from July when permits reached a four-year high of 811,000.

"Since builders are not taking out permits because it is fun to visit their local government office and pay fees, we can conclude that there should be a solid rise in construction in the months to come," said Joel Naroff, chief economist for Naroff Economics Advisors.

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AP Real Estate Writer Alex Veiga contributed from Los Angeles to this report.

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