The housing market rebounded further in August, with pent-up demand and low mortgage rates driving new construction and spurring sales of existing homes, two reports Wednesday showed.
Existing-home sales rose 7.8% to a seasonally adjusted annual rate of 4.82 million, the National Association of Realtors said. That is the highest since May 2010, when a federal tax credit fueled a mini buying frenzy. The pace was up 9.3% from a year ago.
Recent hiring, though anemic, has added to the pool of potential buyers.
"People look at the job market and say it's terrible. We're sort of treading water but we're adding enough" to slowly boost housing, said Scott Brown, chief economist at Raymond James.
Meanwhile, builders broke ground on an annualized 750,000 homes last month, up 2.3% from July's revised 733,000 and 29.1% above a year earlier. Single-family starts hit their best level in more than two years.
That new construction is key for economic recovery because it contributes directly to job creation and output.
Builders and related stocks surged on the reports.
The median sale price of an existing home climbed 9.5% in August, to $187,400. It was the sixth straight month of year-over-year gains.
Most analysts don't foresee any rapid rise in prices or building activity until job creation picks up.
"They're trending upward but very slowly and off of a deep bottom," said Moody's Analytics housing economist Celia Chen.
And she says all bets are off if the "fiscal cliff" of rising taxes and drastic spending cuts sends the country careening into recession in 2013.
Still, NAR said inventories were tight in some markets, including parts of Florida and the West, pushing up prices there.
Foreclosures and short sales — which typically sell at discounts — accounted for 22% of deals vs. 24% in July and 31% a year ago.
Low rates make house prices look cheap too.
A 30-year fixed rate mortgage edged up to 3.6% in August from July's record-low 3.55%, but was down from 4.27% a year ago, data from Freddie Mac show.
The Federal Reserve announcement last week of open-ended buys of mortgage-backed securities should keep those rates low.
But banks are still reluctant to lend, NAR says, scuttling many deals.