US housing market recovery gains traction

The recovery in the US housing market continues to gain traction, data released Wednesday showed, a key improvement in the struggling economy just seven weeks before the presidential election.

With the economy dominating a tight race between President Barack Obama and Republican rival Mitt Romney ahead of the November 6 vote, signs of life are welcome in the housing sector, where millions of Americans have tied up their savings.

A pair of August housing data releases Wednesday further cemented the rough road back from a 2006 price bubble, analysts said.Existing home sales jumped 7.8 percent from July, the highest pace since May 2010, and were up 9.3 percent from a year ago, and prices increased the most in more than six years, the National Association of Realtors said.

The median price for all housing types, including single-family homes, apartments and townhouses, rose to $187,400 in August, up 9.5 percent from a year ago, the NAR said.

That was the strongest year-on-year price increase since January 2006, just before the market collapse that drove the world's biggest economy into the severe 2008-2009 recession.

"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.

"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, the largest segment of the market, 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.

The data came on the heels of a sharply brighter outlook in the housing construction sector.

The National Association of Home Builders said Tuesday its NAHB/Wells Fargo sentiment index rose for a fifth straight month to its highest reading since June 2006.

"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," said NAHB chief economist David Crowe.

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.

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.

By AFP