Housing and Economic Conditions Better Than Expected

Pending home sales continued to drift downward, suggesting that the pace of existing home sales will likely be slowed next month.

Recent economic news has been better than expected, but expectations were decidedly low following several months of a spluttering economic recovery. The latest news from overseas is less than encouraging.

The renewed concern that Europe will enter a recession in the fourth quarter because of its debt crisis will likely slow demand for U.S. exports and further depress business confidence. While the United States isn't expected to follow Europe into recession, economic growth will be slower.

The final estimate of real GDP growth for the second quarter was revised up to a still modest 1.3 percent, with personal consumption expenditures and exports higher than previously estimated.

At a little more than 100,000 new jobs, September employment growth also was better than anticipated, but it remains well below the level needed to reduce unemployment. Likewise, consumer confidence improved slightly, but it remains near the levels recorded during the recession.

Recent housing news has been mixed. There was a near doubling in the number of metropolitan areas judged to be improving by NAHB/First American Improving Markets Index and private residential construction spending ticked up slightly.

During a recent Senate Finance Committee hearing on the merits of homeownership tax incentives to support housing demand, NAHB economist Robert Dietz presented NAHB's case for retaining the mortgage interest deduction. Although several panelists at the hearing disputed specific benefits of the deduction, all agreed that removing it would de-stabilize an already fragile housing market by lowering demand and house prices.

- Courtesy of NAHB