Housing market showing broader signs of improvement

Sales of existing homes hit their fastest pace in more than two years in August, another sign the housing market is making progress toward a robust recovery. 

Sales, which are completed transactions including single-family homes and condominiums, rose 7.8 percent to a seasonally adjusted annual rate of 4.82 million in August, the fastest clip since May 2010 and 9.3 percent higher than August 2011, according to a report released Wednesday by the National Association of Realtors.

The national median price rose on a year-over-year basis for the sixth straight month.

"The housing market is steadily recovering with consistent increases in both home sales and median prices," said Lawrence Yun, NAR chief economist.

"More buyers are taking advantage of excellent housing affordability conditions," he said. 

Meanwhile, homebuilders started construction on 2.3 percent more homes and apartments in August, the Commerce Department said Wednesday. 

The increase was driven by single-family sales, in which the pace of new construction rose in every region for a combined 5.5 percent gain to 535,000 units, the best pace since April 2010. 

Building permit applications decreased 1 percent to an annual rate of 803,000, a drop-off from the four-year high hit in July.

Still, construction and permit levels are still only about half the pace for what is considered a healthy market. 

"The pace of overall housing production has been edging gradually upward all year as consumers become more confident in their local housing markets, and the latest data are further evidence that the housing recovery is here to stay," said David Crowe, chief economist for the National Association of Home Builders. 

"That said, the pace of this recovery continues to be constrained by various hurdles, including a tough lending environment, inaccurate appraisals and more recently, rising prices on key building materials."

Regionally, starts were mixed, with the Midwest and South posting gains of 20.7 percent and 3.7 percent, respectively, while the Northeast and West showed drops of 12.6 percent and 4.3 percent. However, single-family starts rose in every region in August.

Meanwhile, rates for 30-year fixed mortgages rose to 3.6 percent in August from a record-low 3.55 percent in July, according to Freddie Mac.

"The strengthening housing market is occurring even with difficult mortgage qualifying conditions, which is a testament to the sizable stored-up housing demand that accumulated in the past five years," Yun added.

The national median existing-home price for all housing types was $187,400 in August, up 9.5 percent from a year ago. The last time there were six back-to-back monthly price increases from a year earlier was from December 2005 to May 2006. 

The August increase was the strongest since January 2006, when the median price rose 10.2 percent from a year earlier.

Single-family home sales rose 8 percent to a seasonally adjusted annual rate of 4.3 million in August, and existing condominium and co-op sales increased 6.1 percent to a seasonally adjusted annual rate of 520,000 in August.

Regionally, existing-home sales in the Northeast rose 8.6 percent, were up 7.7 percent in the Midwest, 7.3 percent in the South and 8.3 percent in the West.

Distressed homes — foreclosures and short sales sold at deep discounts — accounted for 22 percent of August sales, down from 24 percent in July and 31 percent in August 2011. 

Foreclosures sold for an average discount of 19 percent below market value in August, while short sales were discounted 13 percent.

Total housing inventory at the end of August rose 2.9 percent to 2.47 million existing homes available for sale, which represents a 6.1-month supply at the current sales pace, down from a 6.4-month supply in July. 

Inventory is 18.2 percent below a year ago, when there was an 8.2-month supply.

First-time buyers have remained mostly steady, accounting for 31 percent of purchasers in August, down from 34 percent in July and 32 percent in August 2011.

All-cash sales were unchanged, at 27 percent of transactions in August, with investors, who account for most cash sales, purchasing 18 percent of homes last month.