"In a nutshell, this report re-enforces what the Fed and Ben Bernanke said last week--that the housing market is improving but depressed, and that housing remains the missing piston in the engine (Bernanke was referring to housing's failure to reignite the economy,)" writes Patrick Newport of HIS Global Insight. "The recovery is proving to be a slow one."
As positive data begin to outnumber negative, analysts warn of a large pipeline of distressed properties that are still weighing down a potentially more robust recovery. Foreclosure activity increased in August, and states that had all but halted the process on thousands of properties, due to judicial challenges to paperwork, are now ramping up again. This will add lower-priced properties to an already low volume of homes for sale.
The question is, will that distress be absorbed quickly by investors and cease to have the negative impact on surrounding properties and consumer sentiment that foreclosures have had in years past? Investors, big and small, continue to move into this market, unafraid that rent prices will fall any time soon.
"The demand for rental housing is incredible," said former GE CEO and author Jack Welch on CNBC Wednesday. "The home rental idea is moving strongly." As for the latest news on housing starts? "We're going nowhere in housing," Welch replied. (Read More: It's 'Frightening' That Romney Is Not Leading Race: Welch)Home sales usually get a slight boost in early fall before tapering off to the slowest season around the holidays. Regardless of seasonality, the numbers are improving, while the barriers to entry, like credit and negative equity, remain. The two will duke it out slowly in these next few months, until a stronger improvement in jobs and more certainty over regulatory changes in the mortgage market finally let the bulls run free.
--Written by Diana Olick at CNBC