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.
Sales and construction rates are still below healthy levels, economists caution. But the improvement has been steady.
This Aug. 21 photo, shows an exterior view of a home sold in Palo Alto, Calif. U.S. sales of previously occupied homes jumped in August to the highest level in more than two years, adding momentum to the housing recovery. The National Association of Realtors says sales rose 7.8 percent to a seasonally adjusted annual rate of 4.82 million. That's the most since May 2010, when sales were fueled by a federal home-buying tax credit.
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.