The U.S. housing market, one of the main drivers of the economic recovery, continues to gain strength despite the drag of rising mortgage rates and other economic headwinds, but some analysts are worried that it may slow in the months ahead.
For now, though, builders are building, sellers are selling and mortgage lenders are less nervous about extending credit to buyers.
The heady price increases in the first half of the year slowed a bit in July, according to data released Tuesday.
But in the face of pent-up demand and emboldened consumers, home values were still heading upward at a healthy pace, rising 12.4 percent from July 2012 to July 2013, according to the Standard & Poor’s Case/Shiller home price index, which tracks sales in 20 cities.
A separate index of mortgages backed by Fannie Mae and Freddie Mac showed an 8.8 percent gain in prices over the same time period.
Two national homebuilders, Lennar and KB Home, reported significant revenue growth and profits in the third quarter. Lennar said its third-quarter earnings rose 39 percent over the third quarter of last year, and KB said its profit had increased sevenfold.
“We still have a lot of young people that are going to start moving out and forming households and we’re going to have to find housing for them,” said Patrick Newport, the chief U.S. economist for IHS Global Insight. “There are shortages of homes just about everywhere.”
Higher home prices help the economy not just by strengthening the construction and real estate industries, but by making homeowners feel wealthier and more likely to spend.