Last week, we wrote that housing would be the economic driver that lifts us from the morass that has plagued the economy for much of 2012. This week's slate of housing data buttresses our argument.

We'll start with existing-home sales. The data show sales rose 2.1%, to a 4.79-million annual rate, in October. harrisburg pa real estatePrices continue to trend higher, with the median price of an existing-home posting at $178,600, an 11% increase over the year-ago median price. The average price, meanwhile, was up 9.9% year over year to $226,300.

Supply was a minor irritant in the data. Existing-home sales likely would have been higher if there had been more homes to sell. Inventory dropped to a 5.4-month supply in October, the lowest level in 6-1/2 years. The number of existing homes on the market, at 2.14 million, is the lowest in 10 years.

Existing-home sales contribute to economic growth, just not as much as new-home sales. Before a new home is sold, it must be built. Construction activity has far-reaching implications. Construction requires new material, new employment, and new financing. Many more businesses are impacted by the sale of a new home than an existing home.

For these reasons, new-home activity is a key component in economic activity.

The good news is that home builders are maintaining a busy construction schedule these days. New home starts were up again in October, rising 3.6% to an annual pace of 894,000 units. The pace in starts is up to a level unseen in over four years.

Given the strong, persistent trend in starts, we weren't surprised to see home-builder sentiment rise yet again. The latest survey of home builders show sentiment is approaching a seven-year high at 46 (50 is the point were optimists and pessimists are split). We expect sentiment, along with new home sales and starts, to trend higher through December and into 2013.

We remain bullish on sales because the housing recovery continues to expand to more markets. Zillow’s October Real Estate Market Reports show that 228 (62%) of the 366 markets it follows saw annual home-value appreciation in October. Among the top 30 metropolitan regions, 29 experienced monthly home-value appreciation.

Financing also continues to trend positively. The Mortgage Bankers Association reports its purchase index was up 3% for the November 6 week. Though applications are volatile week to week, they remain in an up trend dating back to April.

We've mentioned many times that leveraging an appreciating asset is a smart financial move. Borrowing to pay part of the purchase price means realizing a higher return on investment, because borrowing (leverage) requires less equity commitment.

Low lending rates also goose investment returns. Mortgage lending rates continue to hover near all-time lows, and we don't see that changing in the immediate future. Keep in mind, though, should housing ignite economic growth, lending rates will be hard pressed to maintain today's all-time lows.

Courtesy of Jessica Regan.

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