As Congress prepares to vote on an extension of the federal housing tax credit, builders got two pieces of unexpectedly good economic news Monday.
According to data released by the U.S. Census Bureau, private residential construction spending rose 3.9% in September compared to the previous month to a seasonally adjusted level of $256 billion. Overall construction spending grew 0.8% on a monthly basis to a pace of $940.3 billion, beating analysts’ expectations. Year-over-year, September’s construction spending is 13% below the same month last year.
Within the residential category, single-family construction spending grew, as expected, increasing 2.4% to a seasonally adjusted level of $110 billion. Multifamily slid backward, losing 4.1% to land at $25.9 billion in monthly spending.
Annual comparisons remain brutal, with overall private residential construction spending off 27% in September compared to the same month in 2008. In terms of year-over-year category performance in September, single-family was down 35%; multifamily fell 41.2%
Meanwhile, pending home sales beat economists’ projections. This National Association of Realtors index jumped 6.1% in September to mark the eighth consecutive month of increases in this index, which measures the number of contracts signed in a given month. It spiked to a reading of 110.1 in September, which is 21.2% above the same month one year ago.
The reason for such activity in both construction and existing home sales? The tax credit, which will expire at the end of this month if Congress does not act to extend or expand it. “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, NAR’s chief economist.
Michael Rehaut, a JP Morgan analyst who follows the public home builders, agreed—to a point. “While this gain was likely helped by some demand related to the soon to be expiring tax credit on November 30th, nonetheless, we believe it also continues to point to stabilization, if not slowly improving trends in the housing market,” he said.
Builders certainly hope so. But some of the comparisons for the NAR pending home-sales index might give heartburn to those already worrying about a coming double-dip in house prices: The NAR says the year-over-year growth in September is the highest “on record. With a reading of 110.1, the index is also the highest it has been since December 2006, when it stood at 112.8.
Alison Rice is senior editor, online, at BUILDER magazine.