By Nin-Hai Tseng
May 23, 2012

FORTUNE – It almost goes without saying that plenty of headwinds weigh on America’s troubled housing market. To name a few: A weak job market, Europe’s ongoing debt crisis and a persistent excess supply of homes for sale.

But now we can scratch one obstacle off the list (at least for a while) – tighter lending standards.

Many had thought that banks’ willingness to lend would be an important aspect of the housing recovery. While that’s still the case, it has become less so as cash buyers and investors hunt for properties during one of the cheapest times to buy.

A modest housing recovery is under way, even as lenders demand bigger down payments and higher credit scores. In April, sales of existing homes surged by 3.4% over the same month last year, the National Association of Realtors said Tuesday. Admittedly, the upswing isn’t anything to brag about since it follows two previous months of lackluster sales. What’s noteworthy is that almost all of April’s 4.62 million sales were driven by cash buyers and investors looking to turn properties into rentals, which suggests the recovery can continue even if mortgage lending remains tight, according to Capital Economics.

MORE: When ‘Drill Baby Drill’ means ‘Export Baby Export’

From this time a year ago, sales of existing homes rose by 10% and by 14.1% since the low in July 2011. Mortgage lending has eased over the past year, but only marginally. And despite record-low interest rates, applications for home loans have been relatively flat for the past year, according to data from the Mortgage Banker’s Association.

Indeed, the current recovery is unlikely to resemble the rapid bounce-backs of the past. If the healing process continues without many more mortgages, home prices probably won’t rise by much, if at all, given that sellers preferring a speedier closing with cash transactions tend to give buyers a modest discount. Nevertheless, such sales will help reduce the glut of vacant homes.

Looser lending standards will need to be part of a more robust recovery, however. If you believe some economists, the healing process will start with more people renting than buying. And eventually the rent would get so high that it makes more sense to buy.

Much of this has already played out, though. During the first three months this year, the U.S. median asking price for rentals rose by 5.6% compared with a year earlier. It’s now cheaper to buy a home than rent one in 98 of the 100 largest American cities, according to real estate site Trulia.com. To be sure, new home sales have picked up some. On Wednesday, the Commerce Department reported a 3.3% rise to a seaonally adjusted annual rate of 343,000 in April from March — a positive development for builders who have struggled to sell relatively new and higher-priced properties

The market is indeed healing, but it will be one slog of a process as long as it’s mostly mortgage-free.

You May Like

EDIT POST