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The housing market this summer is one of the bright spots in the U.S. economy. The latest data shows that prices nationally are up more than 10 percent from a year ago. In some markets, it's a lot more than that. The pace of sales is rising, too, so Americans are out there bidding on houses again. But is there enough demand to keep the recovery going? That's the question NPR's Chris Arnold tackles.

CHRIS ARNOLD, BYLINE: Christine Carlson is showing me around the condo that she lives in with her boyfriend in Chelsea, across the Mystic River from Boston.

CHRISTINE CARLSON: Chelsea's a cool little town. They're doing a lot of movies here. Denzel Washington just filmed here for his next movie.

ARNOLD: But there's nothing very Hollywood or glamorous about Carlson's condo. For her, it was kind of a barebones, starter place. It's in a small building with old aluminum siding. So last year, she tried to sell it and buy a nicer condo. But her realtor Anita Shishmanian says that that didn't go very well.

ANITA SHISHMANIAN: So we put it on the market, and then it just languished on the market.

ARNOLD: So there's been pressure building up in the housing market. Christine Carlson wanted to sell her condo and buy something better, but a year ago, she couldn't get what she paid for it. So she couldn't sell, and she was stuck.

SHISHMANIAN: Right. She was stuck.

ARNOLD: So imagine now, across the country, there are millions of people like Carlson who want to buy or want to sell and who can't, and so there's been this pent-up frustration or pent-up energy in the economy waiting to get released. And now, that is finally starting to happen. This summer, Carlson and her realtor decided to try to put her house back on the market.

SHISHMANIAN: We did one open house, and had multiple offers right off the bat. People seemed to really like it, and it was priced right. Actually, we probably could've priced it higher.

(LAUGHTER)

CARLSON: Yeah.

ARNOLD: But with the stronger housing market, somebody bought Carlson's condo. And since then, she's gone out and bought a nicer place herself. So there's kind of a chain reaction there. As more people buy homes, that pushes prices up. And as prices go up, that allows more people to sell who used to be stuck, and then they can go buy homes.

But, OK, just how much of this pent-up demand is there?

ANDREW PACIOREK: There's pretty clearly a lot of pent-up demand.

ARNOLD: Andrew Paciorek is an economist with the Federal Reserve Board in Washington. He recently finished a research paper looking at the number of young people moving out of their parents' houses or newlyweds living with relatives who were going out and buying or renting their own places to live. That's called household formation, and it dropped very sharply after the recession hit.

PACIOREK: It's quite unusual. So, you know, the long run trend is probably about one-and-a-quarter million households forming per year, on net.

ARNOLD: But from 2006 through 2011, there were less than half that normal number of new households forming.

PACIOREK: If you go back over history, that's pretty clearly the lowest five-year period on record, at least back to the 1950s or so.

ARNOLD: Really? So, I mean, we're talking about 60-plus years we've never seen so few households forming in America.

PACIOREK: Yeah. That's exactly right.

ARNOLD: So now, those people living in their parents' basements, more of them are starting to move out, and household formation is on the rise again. Paciorek stresses that predicting the future is tricky, but his economic model predicts that the housing market will continue to see a steady boost as people form new households. That would likely mean more homebuilding jobs and all kinds of other jobs.

And all that would be good, but...

JOHN MAKIN: There's pent-up demand, but the question is: Is there pent-up effective demand?

ARNOLD: That's John Makin, an economist with the American Enterprise Institute. He says the bottom line is that people just don't have that much money to spend. Wage growth is weak. If you don't have a great credit score, it's hard to get a home loan. The unemployment rate is still falling very slowly.

MAKIN: I mean, look, everybody wants to get back to normal, and everybody would like to go out to dinner as much as they used to. And they'd like to, you know, be buying a bigger and better house, and all that stuff. And so there's certainly plenty of frustration. But the effective demand is that the income isn't there.

ARNOLD: In fact, when it comes to the overall economy, Makin is getting worried that the weak economic recovery could lose momentum. He thinks that unless Congress takes more action - say, through tax cuts and stimulus spending - the economy, he thinks, could slide back into real trouble. That's more pessimistic than most economists who think the economy is going to keep moving forward, even if slowly. But at least when it comes to housing, everybody agrees that it's nice to finally be getting a boost. Chris Arnold, NPR News, Boston.

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