“The strengthening housing market is occurring even with difficult mortgage qualifying conditions, which is testament to the sizable stored-up housing demand that accumulated in the past five years,” said the National Association of Realtors’ chief economist Lawrence Yun.
With the August jump of 7.8 percent from July, Realtors now say they are confident that home sales for all of 2012 will hit their highest level in five years. They do warn that there are still “frictions” in the market, not the least of which are about 12 million borrowers who owe more on their mortgages than their homes are worth. These so-called “underwater” borrowers are largely stuck in place, unable to cover their debt and unable to move up. (Read More:Cities With the Most Affordable Homes)
“Bottom line, housing continues to recover, but the bounce still has to be put into the perspective of how much damage was done,” notes Peter Boockvar at Miller Tabak. “Looking specifically at single family homes, at a sales level of 4.30mm, it's back to where it was in 1998 and of course still well below the bubble high of 6.34mm in Sept '05.”
The jump in August home sales came on the heels of the government’s report on housing starts, which was positive but not as strong as some had predicted. Single family starts rose 5.5 percent month-to-month, but multifamily starts fell nearly as much. Building permits, considered a more reliable indicator of construction, were nearly flat (+0.2 percent) for single family, but hit the highest level since March of 2010. Multifamily permits fell 3 percent, but that was after an 11 percent jump in July. Multifamily construction continues to outpace the single family segment. (Read More:Home Builders Bullish for Fifth Straight Month)
“In a nutshell, this report re-enforces what the Fed and Ben Bernanke said last week—that the housing market is improving but depressed, and that housing remains the missing piston in the engine (Bernanke was referring to housing’s failure to reignite the economy,)” writes Patrick Newport of HIS Global Insight. “The recovery is proving to be a slow one.”