GLENN EZELLE

Nov. 2 (Bloomberg) -- The number of contracts to buy previously owned homes in the U.S. rose in September for an eighth straight month as Americans rushed to meet a deadline for a home-buyer tax credit.

The index of signed purchase agreements, or pending home sales, rose 6.1 percent after a 6.4 percent gain in August, the National Association of Realtors said in Washington. Compared with a year earlier, pending sales rose 19.8 percent, without adjusting for seasonal variations.

Many buyers accelerated purchases of new homes to take advantage of the $8,000 tax credit before it expires Nov. 30. Foreclosure-driven price declines and low mortgage rates have also pushed sales up this year. Home sales may cool in coming months unless the credit is extended under a deal worked out by Senate Democrats.

“Home sales continued to show improvement as we see people rush to take advantage of the homebuyer tax credit, although the sustainability of this move is in doubt, and we expect a far slower growth rate going forward,” David Semmens, an economist at Standard Chartered Bank in New York, said before the report.

Stocks extended gains after separate reports showed that manufacturing expanded at the fastest pace in more than three years and spending on construction unexpectedly increased.

The Standard & Poor’s 500 Index added 1.3 percent to 1,049.43 at 10:21 a.m. in New York.

Factory Index

The Institute for Supply Management’s factory index rose to 55.7 in October, the highest level since April 2006, from 52.6 in September, according to the Tempe, Arizona-based group. Readings above 50 signal expansion.

Construction spending rose 0.8 percent in September, the most in a year, followed a revised 0.1 percent drop in August, Commerce Department figures showed. Spending on residential and government projects climbed, while outlays on private commercial construction slumped.

Pending home sales were projected to be unchanged in September from the prior month, according to the median forecast of 33 economists in a Bloomberg News survey. Estimates ranged from a drop of 2.5 percent to an increase of 5.5 percent.

The Realtors group has collected pending sales data since January 2001, and it started publishing the index in March 2005.

Leading Indicator

Pending home sales are considered a leading indicator because they track contract signings. The Realtors’ existing- home sales report tallies closings, which typically occur a month or two later.

Sales rose in three of four regions from the prior month. They increased 10.2 percent in the West, 8.1 percent in the Midwest and 4.9 percent in the South. Sales fell 2 percent in the Northeast.

“As long as buyers do not overstretch and stay well within their budget, a sizeable pent up demand can be tapped among financially qualified potential buyers,” NAR Chief Economist Lawrence Yun said in a statement. Still, “We’re clearly not out of the woods because an excess of homes remains on the market.”

Sales of existing homes surged a record 9.4 percent in September to a 5.57 million annual rate, a report last month showed. The median price fell at the slowest pace in a year as the number of houses on the market shrank.

Federal Reserve

The Federal Reserve has announced it will phase out its purchases of $1.25 trillion in mortgage-backed securities by March, signaling borrowing costs for home buyers may rise after the average rate on a 30-year mortgage fell to a record 4.78 percent in April.

Housing-related companies are still recovering from the industry’s worst slump since the Great Depression. USG Corp., North America’s largest maker of gypsum wallboard, posted its eighth straight net loss last quarter as sales dropped 32 percent from the same time last year.

“We’re expecting we’ve hit the bottom in housing,” Chief Executive Officer William Foote said Oct. 21 on a conference call with analysts. He added it would take time for any sustained improvement to “really kick in.”

To contact the reporters on this story: Bob Willis in Washington bwillis@bloomberg.net;