Home Sales, Residential Construction Increase

Pending home sales and residential construction both posted significant increases in September, according to separate reports released today by the Commerce Department and National Association of Realtors (NAR), signaling that the housing market may be pulling out of its doldrums.

September marked the eighth consecutive monthly increase in pending home sales, which is the longest such streak since the NAR began tracking the data since 1991. Home sales rose at an annual rate of 6.1 percent in September, the NAR reported, and were 21.2 percent ahead of their September 2008 level, just prior to last year's crash of credit markets.

Meanwhile, the Commerce Department reported today that residential construction spending increased at a 3.9 percent annual rate in September, helping drive a 0.8 percent increase in construction overall. It was the third consecutive monthly increase in residential construction, although the annual trend remains strongly down, with residential construction spending still 26.3 percent below the September 2008 level.

"What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," said Lawrence Yun, chief economist or NAR, in discussing the increase in pending sales. He predicted that home prices would soon stabilize, rather than decline again as some have predicted will happen once government stimulus efforts cease.

The NAR estimates there are approximately 3 million renters who are currently well-qualified to buy a median-priced home at today's home values and mortgage interest rates, meaning that a sizable pent-up demand remains.