The National Association of Realtors will release the latest statistics on home sales Wednesday.

Deutsche Bank (DB) analysts are expecting a 3% existing home sales bump for the month of July, bringing the annual rate to 4.5 million. This is inline with the Econoday consensus of 4.3 million to 4.65 million.

"Figures for July were released last week, and though starts fell slightly (746k vs. 754k in June), permits spiked (812k vs. 760k) to the highest level since August 2008," write Fixed Income analysts Joseph LaVorgna and Carl Riccadonna. "The positive trend in the construction data cannot be characterized as the result of favorable weather or short-term tax incentives, rather, it is the product of improving demand coupled with a dearth of new home supply which is channeling demand into the existing home market."

LaVorgna and Riccadonna begin their email by stating more evidence is mounting that a modest housing recovery is underway.

As proof, they say the National Association of Home Builders index rose to its highest level since February 2007. In the second quarter, they add, both starts and permits are above the first quarter average.

"The improvement in housing activity is also evident from home prices, which have been moving higher," they said, citing the CoreLogic (CLGX) home price growth of 10.6% annualized in Q2, the largest gain since Q4 2005 (+10.8%). "Higher home prices are lifting owners’ equity, which is also getting a boost from larger mortgage down payments and possibly the paying down of mortgage debt."

Deutsche Bank states homeowner equity is up $333 billion in Q1 2012 from the year before.

LaVorgna and Riccadonna predict that more bank lending activity will also impact the housing recovery.

"Banks need to loosen standards on real estate," they said. "If the labor market reaccelerates in the second half as we are projecting, then home prices should continue to recover."