Bank of America Corp (BAC), JPMorgan Chase & Co. (JPM): How Housing Built the Dow Jones Industrial Average (.DJI)’s Surge

The housing market’s recovery has been one of the best signs of the economy’s comeback from the depths of the 2008 recession, and strong data from the sector has fueled stocks today. The Dow Jones Industrial Average (Dow Jones Indices:.DJI) has rallied behind its financial stocks, jumping 80 points, or around 0.51%, as of 2:15 p.m. EDT. Housing’s optimism has pushed the majority of the blue-chip index’s members into the green in what’s shaping up to be a good day for investors. Is this sector on pace for even more gains? Let’s check out how housing spurred the market’s gains.

Housing’s big comeback

Pending home sales rose another 0.3% in April, according to a National Association of Realtors release today. That’s a high not seen since April 2010, although it fell below economist predictions. It may be just one number, but the gain in pending sales comes on the back of multiple strong indicators of housing’s rebound.

According to the Federal Housing Finance Agency, home prices rose 1.9% in the year’s first quarter, and private housing starts in April were 13.1% ahead of April 2012’s figure. While some have cautioned that reduced supply of houses on the market could hurt sales in coming months, prices should capitalize and continue to rise. That’s good news for sellers as the market digs out of the drastic dive in prices brought on by the financial crisis.

Higher prices mean good things for the financial sector, too, and two of the Dow’s big banks are on the upswing today. Bank of America Corp (NYSE:BAC) has jumped 2.7% to lead the index higher, while fellow financial powerhouse JPMorgan Chase & Co. (NYSE:JPM) has seen its stock rise 1.9%. Rising home prices are just what Bank of America Corp (NYSE:BAC) needs to push past its losses from its Countrywide disaster and other problems related to the recession. While Bank of America Corp (NYSE:BAC) doesn’t finance quite so much as some competitors in the mortgage loan business, the firm still generated $24 billion in home loans in the first quarter. Lagging supply will reduce the number of loans the bank processes, but the hike in prices will keep the firm steady.

JPMorgan Chase & Co. (NYSE:JPM) is set to ride housing higher with its business firmly behind CEO and chairman Jamie Dimon after he survived criticism and calls for his roles to be split. While the bank’s still dealing with regulatory scrutiny over its “London Whale” trading losses and other affairs, JPMorgan Chase & Co. (NYSE:JPM) has gotten back into home-loan-backed bond sales recently. The firm has already made one sale of “high-quality” mortgage-backed bonds this year, according to Bloomberg, and it’s planning another sale soon. JPMorgan Chase & Co. (NYSE:JPM) investors could use a breather from the drama of regulation and leadership issues, and if housing can continue to rise, this firm should be just fine.