It looks like the housing market is improving according to the latest report from the Commerce Department. New home sales reached their highest level in two years last August as prices soared to record level in more than five years.
The Commerce Department reported that sales dropped 0.3 percent to a seasonally adjusted 373,000 unit annual rate from the 374,000 July pace that was the quickest since April of 2010. Compared to the same period last year, the sales were up 27.7 percent in August.
The average price of a new home went up 11.2 percent in August to $256,900, which is the highest since March 2007. The average sales price soared 17 percent compared to August 2011, which is the biggest increase since December of 2004.
The Commerce Department report reflected the other data that showed an improvement in the housing market, which collapsed in 2006 and led to the 2007 to 2009 recession. Home re-sales went up in August as homebuilder sentiment reached a six year high in September.
Home prices in 20 major cities went up in July. It was the sixth straight month that prices went up. But even with all the positive signs from the housing market, it lacks strength to become the main driver of the nation’s economic recovery.
The financial markets were slightly moved by the housing market data but investors were still worried about Spain’s reluctance to ask for a bailout. This would prolong the debt crisis in the euro zone. An index of housing-related stocks dropped as pace of home sales was not enough to spur interest in the market.
The Federal Reserve focused on the housing this month as a factor to boost economic growth. Fed Chairman Ben Bernanke said that housing was missing in the recovery and the Fed announced that it would buy $40 billion in mortgage-backed securities each month until the unemployment rate improves significantly.