The existing home market put in strong performance in October as buyers tried to beat the then-looming deadline for the federal housing tax credit.
According to the National Association of Realtors (NAR), the pending home sales index rose 3.7% to a reading of 114.1 in October, which represents the ninth monthly increase in a row for the indicator. On an annual basis, that reading is also 31.8% above the same month one year ago, which the NAR said is the highest yearly jump since the index was established in 2001.
The federal government approved an extension and expansion of the credit in early November.
Meanwhile, private single-family residential construction spending rose just 1.9% in October, to a seasonally adjusted pace of $112 billion, according to a separate report released Tuesday by the U.S. Census Bureau.
“Single-family starts have slowed probably because the tax credit for first-time home buyers shifted the timing of housing starts from the second half of 2009 into the first half,” according to Patrick Newport, U.S. economist at IHS Global Insight. “Going forward, single-family starts should continue to improve because inventories of new homes have fallen to their lowest level since 1972, and will require restocking and because the household formation rate will increase as the economy starts adding jobs in 2010.”
Multifamily construction fell again, dropping 2.1% on a monthly basis to a seasonally adjusted level of $25 billion. “This market is being hit on two fronts,” Newport noted. “Tight credit and overbuilding are hammering multifamily housing construction, which has nearly ground to a halt. The rental market is also being hurt by falling house prices and the tax credit for first-time home buyers, which is swaying renters into becoming homeowners. The outlook for this category over the next 12 months is grim.”
Overall, private residential construction spending rose 4.4% in October to a seasonally adjusted level of $250 billion. That represents a 23.6% decline from the same month one year ago. Similarly, single-family and multifamily spending stood, respectively 30.7% and 43.6% below October 2008’s activity.
Total construction spending in the United States was flat, according to the government, at a seasonally adjusted pace of $910.8 billion in October.
Alison Rice is senior editor, online, at BUILDER magazine.