NEW YORK (CNN/Money) - Homes sold at a faster pace in September, according to an industry report that showed the sales of existing homes coming in well above Wall Street expectations.
The National Association of Realtors reported that existing homes sold at an annual rate of 6.75 million homes in the month. That's up from the revised 6.55 million pace in August and ends two months of slower sales.
Economists surveyed by Briefing.com had forecast that the annual sales rate would stay unchanged at 6.54 million.
Despite the Federal Reserve starting a policy of measured interest rate increases in June, mortgage rates have been almost steadily falling since May, supporting the strong housing market.
"Since 1971 there have been only five months when mortgage interest rates were lower, and all of those have been during the last year and a half," said David Lereah, NAR's chief economist.
The survey from mortgage financing firm Freddie Mac found the average 30-year fixed mortgage rate at 5.69 percent in the week ended Oct. 21, the lowest level since early April. Since the low rates of September have continued through October, this is probably not the last strong home sales report. Even if rates start to creep up again, it could spur a rush to buy homes and lock in the current low rates.
"We still expect mortgage interest rates to gradually rise, so the best window may be right now for potential home buyers who have been on the sidelines," said NAR President Walt McDonald.
Lereah said that his group now forecasts full-year sales of about 6.5 million, which would top the record of 6.1 million set last year. He said there is no indication on the horizon of a bursting of the so-called housing bubble that could send sales and sales prices plunging.
"The fundamentals for the housing sector are very good," he said. "People try to find something negative because they can't believe it will continue. But it's not a coicidence that the baby boomer generation is coming into its peak earning power and that demand for home ownership by immigrants is growing at a time the housing market is exploding."
Jason Schenker, economist with Wachovia Securities, which had forecast existing home sales near the reported levels, agreed with Lereah that there is no national housing bubble, although he warned there are probably some individual markets around the country that are at risk of a bubble bursting.
"If there were a lot of homes in inventory, we could anticipate a bubble bursting, but there isn't," said Schenker. The NAR sales figures show about a 4.4 month supply of homes on the market, little changed from the 4.5 month supply in August or the 4.3 month supply in September 2003. Nationwide median home prices -- the point at which half the homes sold are more expensive, and half are less expensive -- were down slightly from August but up 8.6 percent from a year earlier. Each region of the country has seen a year-over-year increase in median pricing.
But the strong report is not enough to convince skeptics who see a housing bubble on the verge of bursting. Dean Baker, co-director of the Center for Economic and Policy Research, argues that the housing market has been supported by the low mortgage rates that have lasted longer than originally forecast. He said that when those mortgage rates start to move up to the 7 or 7.5 percent rate, housing sales and prices are bound to fall.
"I will grant I've been surprised the housing market has stayed as strong as it has as long as it has," he said. "But it doesn't mean there hasn't been a bubble. If you had talked to me in February of 2000 and bragged about how much the Nasdaq had just gone up, it wouldn't have changed the fact that there was a bubble in that market."