Strong construction and housing data help build confidence in economy
Filed under: Economy
Two economic indicators released Monday signal an ongoing U.S. economic recovery. First, construction spending rose 0.8 percent in September, the U.S. Commerce Department announced, well above the 0.2 percent decline expected by economists surveyed by Bloomberg News. Also, pending homes sales rose 6.1 percent in September, the National Association of Realtors said; it was the index's eighth straight monthly rise. The September rise in construction was boosted by spending on private residential building, which rose 3.9 percent, the Commerce Department said. Further, although August's construction spending total was revised lower to a 0.1 percent decline from the previously released 0.8 percent, U.S. stock markets will probably look past the August data and emphasize the more recent September increase. Also in September, non-residential construction rose 1.8 percent.
During the first nine months of 2009, construction spending has declined 12.1 percent. On a year-over-year basis, construction spending is down 13.0 percent.
Meanwhile, the NAR's Pending Home Sales Index, a forward looking indicator, increased to 110.1 in September from 103.8 in August, and is now 21.2 percent higher than a year ago. The index is based on sales contracts signed for existing homes, in this case, contracts signed in September. Most homes sales close within six weeks of signing, and at that point the government counts them as existing home sales.
In general, economists view existing home sales as a more accurate indicator of housing sector activity than pending home sales, as mortgage problems, title issues, liens, and other complications sometimes prevent signed housing contracts from being finalized.
Even so, Lawrence Yun, chief economist for the NAR, said positive momentum in the housing sector as evidenced by pending sales is unmistakable and understandable.
"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," Yun said in a statement. "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery."
Analysis: Of the two positive data points, the market will allocate more weight to construction spending. Construction spending may not be a major growth catalyst for the U.S. economy right now, but as long as it stays out of negative territory, that eliminates a major economic drag. The market will interpret this as a plus for the economy: the construction sector's slow recovery is continuing and it won't subtract substantially from GDP. Second, the pending home sales data, while also positive, is not as telling as the finalized new home sales and existing home sales data -- which measure housing transactions that have closed or been finalized. Even so, the eight-month rise in pending homes sales does provide further evidence of increasing home buyer interest and a housing sector on the mend.
Meanwhile, the NAR's Pending Home Sales Index, a forward looking indicator, increased to 110.1 in September from 103.8 in August, and is now 21.2 percent higher than a year ago. The index is based on sales contracts signed for existing homes, in this case, contracts signed in September. Most homes sales close within six weeks of signing, and at that point the government counts them as existing home sales.
In general, economists view existing home sales as a more accurate indicator of housing sector activity than pending home sales, as mortgage problems, title issues, liens, and other complications sometimes prevent signed housing contracts from being finalized.
Even so, Lawrence Yun, chief economist for the NAR, said positive momentum in the housing sector as evidenced by pending sales is unmistakable and understandable.
"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," Yun said in a statement. "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery."
Analysis: Of the two positive data points, the market will allocate more weight to construction spending. Construction spending may not be a major growth catalyst for the U.S. economy right now, but as long as it stays out of negative territory, that eliminates a major economic drag. The market will interpret this as a plus for the economy: the construction sector's slow recovery is continuing and it won't subtract substantially from GDP. Second, the pending home sales data, while also positive, is not as telling as the finalized new home sales and existing home sales data -- which measure housing transactions that have closed or been finalized. Even so, the eight-month rise in pending homes sales does provide further evidence of increasing home buyer interest and a housing sector on the mend.
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Reader Comments (Page 1 of 1)
11-02-2009 @ 1:14PM
fpeirce said...
What a bunch of crap. The government hands out some "free money" before an election to "gin up" the news and the greedy jump on it. I can't believe even the liberals think the economy is turning around. Even another big banking firm goes belly-up (even with the government's help), 23000 Chrysler workers about to lose their jobs, and we're expected to believe that things are getting better? Obamanomics at its finest.
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11-02-2009 @ 1:32PM
Unemployed said...
Hope for recovery all you want but until there is help from WASHINGTON to help the UNEMPLOYED from being foreclosed on there will be NO RECOVERY!!!! We need jobs jobs jobs!!!! Where is the help for the UNemployed worker who can no longer meet their mortgage obligation because you only get approximately $325 week unemployment less taxes! Tell me how you can make a mortgage payment, pay for food, gas, insurance, taxes etc. etc.!!! The American Unemployed are getting slapped in the face and loosing everything while Washington Bails out everyone on Wall Street! Great for the first time home buyers tax credit.............SAD for the person who is loosing their homes and have to watch someone else buy it!!!!!!!!!!!!!!!!!!!!!!! WAKE UP WASHINGTON and help the UNEMPLOYED! What happened to Barney Frank and Chris Dodd's TALK of helping the Unemployed stay in their homes???? This just all makes me SICK.
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11-02-2009 @ 1:32PM
hemipwr54 said...
Around here new homes are not moving and construction of them is very slim .
Think maybe this is a Government "feel good" story ?
The Propaganda continues , and more stimulus on the way !
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11-02-2009 @ 2:12PM
Keevin said...
Times are really tough here for me as well! I'm a small business owner of 11 years with the last 2 being a real struggle! But I believe in being optimistic & letting the economists/ Government put out the positive news so we can all feed off that & pull out of this slump eventually. Think about it people, if all news was all bad regarding the recession...you end up with nothing but negativity & will remain in the recession until we do get some positive feedback from somewhere. Stay positive folks....stay positive!
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11-02-2009 @ 3:10PM
Realist said...
What I and everyne I know continue to do is BUY AMERICAN products, or buy nothing at all. It does make a difference. The best thing for our country right now would be to develop an ISOLATIONIST policy - just after voting for a third party candidate (Independent or Libertarian). America first!! This includes stopping ALL FOREIGN AID!!
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11-02-2009 @ 3:46PM
dang1067 said...
September was long gone 2-months ago OLD news!!! Joseph Lazzaro, you need to pull your head out of your stinking anus!!!! What news you got for November you fvcking turd!!!
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11-02-2009 @ 4:00PM
Frank said...
With unemployment up, foreclusures up, construction is up? WTF? Who makes up these stories? Wanna buy a bridge?
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11-02-2009 @ 4:04PM
Fran said...
Is this a pep talk? Reality, it's a POOP talk. Someone is dreaming while the rest of us are in a nightmare! We've got castles around here that once sold for $750,000. Now the builder is trying to unload them for half that amount. Hold on while I tell him he can restart his business......
but wait, perhaps he can start building again. He can modify these environmental suckers from their 6,000 sq.ft. into apts. The fed's can sell them thru HUD or the state's can use them for Section 8 housing. Like the article title, "Strong construction and housing data......"
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11-02-2009 @ 5:12PM
Manny said...
The minute rise in construction material is do to the floods in the south ( Ga.)
The rise in home sales is do to the fact that those who lost their jobs and then their homes are making the rich even richer. Yes home sales are up, but it's just the rich swooping in like vultures and buying up foreclosures at $0.40 on the dollar and destroying all existing homeowners property values.
What a crooked, thieving bunch of liars we have running our country, if you think this recession is almost over, your an idiot, the worst is yet to come.
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11-12-2009 @ 5:22PM
Mikhelin said...
I'm licensed General Contractor under BOA Construction Corp for 15 years..I see nothing changed. This is your governement propaganda for Illegal Obama. Its coming worsen until 10 years. Becuz you buy more than the house worth right now. If there is non-african controlled country, we will have no propaganda. Remember Fact: All africans or (running away slaves) are liars 10 times more than Whites.
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