NEW YORK (CNN/Money) - The U.S. housing market strengthened in September, according to separate reports Monday from the government and the nation's Realtors, defying expectations of a slowdown.
A report from the National Association of Realtors (NAR) showed sales of previously owned homes rose 3.6 percent to a record annual rate of 6.69 million units in September. Economists, on average, expected a pace of 6.3 million units, according to Briefing.com.
Separately, the Commerce Department said sales of new homes fell 0.2 percent to an annual pace of 1,145,000 units from August's pace of 1,147,000. Economists, on average, expected a pace of 1,110,000 units, according to Briefing.com.
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"We knew the September pace for existing-home sales was going to be a big number, but after setting records in July and August we thought the pace might start to slow," NAR chief economist David Lereah said. "This underscores the powerful fundamentals that are driving the housing market -- household growth, low interest rates and an improving economy."
U.S. stock prices had little reaction to the report, continuing to rise in early trading. Treasury bond prices fell.
Though the economy suffered through a recession in 2001 and has slogged through a jobless recovery ever since, super-low interest rates have fueled demand for mortgages, which has boosted the housing market and encouraged a boom in mortgage refinancing.
Consumers have been able to cut their monthly debt payments and tap into their higher home equity through mortgage refinancings. Consumer spending, which fuels more than two-thirds of the total economy, has been supported as a result.
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Mortgage rates have risen from their mid-summer lows, and most economists expect rates to continue to rise; many buyers may be rushing into the market to lock in rates while they're still historically low.
In fact, mortgage rates actually fell a bit in September, adding more support to sales -- mortgage lender Freddie Mac said the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.15 percent in September, down from 6.26 percent in August.
"We will eventually see the negative impact of rising rates -- we can't dodge that bullet -- but doesn't usually happen at the beginning of the cycle," said Anthony Chan, chief economist at Banc One Investment Advisors. "I'm not sure we will continue to see the market beating expectations by these margins, but I don't see the market collapsing in the next month or so."
Prices slow, inventories shrink
The NAR said the national median existing-home price was $172,300 in September, down a bit from August's median price of $177,500, but 9.1 percent higher than the September 2002 median price of $157,900.
The new home sales pace in the Northeast jumped 26 percent to 97,000 units per year, the fastest pace since January 1997. The sales pace in the West jumped 12.4 percent to a 335,000 units per year.
But the pace of sales in the Midwest fell 12.4 percent to 209,000 units per year, and the pace of sales in the south fell 2.5 percent to 504,000 units per year.
Some economists have worried that home prices are in a dangerous "bubble" -- similar to over-inflated technology-stock prices in the late 1990s -- which could abruptly pop, hurting homeowners.
Though most economists dismiss this concern, saying the national housing market is too big and diverse for prices to move up and down in unison, some say it is possible that bubbles could develop in regional markets.
One condition of a bubble, overly high housing inventories, is certainly not a problem; the backlog of houses on the market fell to a 4.3-month supply, compared with an already-low 4.6-month supply in August.
"This is a very tight inventory situation, which is continuing to drive home price appreciation," Lereah said.
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