The number of contracts to buy previously owned homes rose for the ninth straight month in October, as the tax credit for first-time homebuyers pushed sales to their biggest annual increase on record, a real estate organization said Tuesday.
Separate reports showed residential construction and manufacturing were rallying toward recovery; sales by U.S. automakers were mixed.
The National Association of Realtors said its Pending Home Sales Index increased 3.7 percent from September, and 31.8 percent from October 2008. It was the largest annual increase in sales agreements since the NAR began keeping records.
"This means the tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," said Lawrence Yun, NAR's chief economist.
The report — based on signed contracts to buy homes — showed the biggest increase in the Northeast, where pending home sales surged nearly 20 percent in October.
Tax Credit Boosts Contracts
Homebuyers are in line for as much as an $8,000 tax credit if they buy a home before April 30. The tax credit, which includes first-time homebuyers and others, had been set to end Nov. 30. Congress extended the credit and made many existing homeowners eligible to receive a credit of up to $6,500 for home purchases.
Yun cautioned that future home sales could dip because the tax credits were only recently extended from the end of November. He said it can take from three to five months between the time a buyer begins searching for a home until a sale closes.
"Given the lag time, we could see a temporary decline in existing home sales from December until early spring, when we get another surge," Yun said, adding that the weak job market could also have a negative impact on home sales.
Economist Patrick Newport with IHS Global Insight said prospects for December were dire.
"The single-family housing market is still very weak," Newport said. "This is the last wave associated with that tax credit. I'm expecting bad numbers in December."
Newport said the record number of delinquent loans means that more foreclosures will continue to be dumped on the housing market, keeping the industry in a slump for the next couple of years.
Auto Sales Mixed
Ford Motor Co. reported year-over-year sales were nearly flat for November, while General Motors posted a small decline, and Chrysler Group LLC posted a whopping 25 percent drop.
Toyota, Kia Motors and Hyundai each showed gains.
Ford credited buyers of its fuel efficient models with steadying sales. Last month, buyers snapped up 118,536 of the company's Ford, Lincoln and Mercury models — a 0.2 percent decrease. The company reported that sales of its Taurus and Fusion models were up 54 percent.
Chrysler posted sales of only 63,560 units, though the company saw some bright spots in increased sales of Jeep, Chrysler Sebring and Dodge Journey models.
GM said its November sales fell 2 percent from the same period last year.
Although rebates and low financing lured some customers into showrooms last month, University of Michigan professor Martin Zimmerman predicted that auto sales won't rise until the employment picture improves.
The U.S. jobless rate hit 10.2 percent in October, a 26-year high.
Manufacturing Swings Upward
In a separate report, U.S. manufacturing grew for the fourth straight month in November, a sign that factories were on the road to recovery.
The Institute for Supply Management's manufacturing index measured 53.6 last month — sluggish compared to October's 55.7, but above the 50 mark that signals expansion.
Norbert Ore, chairman of the ISM survey committee, said the positive trend in new orders and production is an encouraging sign that growth will continue.
"Overall, the recovery in manufacturing is continuing," Ore said, but he warned that some sectors aren't out of the woods yet.
The ISM survey found that 12 of 18 manufacturing industries reported growth, including apparel makers, and petroleum and coal products.
Five industries saw their production fall in November, including plastics and rubber products, as well as food, beverage and tobacco products. Manufacturers in those sectors said the low value of the dollar was driving commodity costs higher, according to the report.
Construction Remains Flat
Meanwhile, the Commerce Department said construction spending saw little movement in October, though residential construction jumped 4.4 percent — the largest advance in home building since March 1998.
Revised figures for September showed a 1.6 percent drop in overall construction spending, rather than the 0.8 percent increase the department had previously reported. The September decline was the sharpest since January. For the first 10 months of 2009, spending was down 12.6 percent from the year-ago period.
Material from The Associated Press was used in this report.
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