It’s not all bad news coming out of the housing market saga.

Analysts had projected a decline in new home sales in September but had a surprise coming to them.

New home sales rose 4.8 percent last month to a seasonally adjusted annual pace of 770,000 units, according to the Commerce Department. That’s 23.3 percent below the September 2006 estimate of 1 million units.

The median sales price also rose last month, hitting $238,000.

Home sales continued to suffer from the mortgage market turmoil last month.

Sales of existing homes fell to a seasonally adjusted annual rate of 5.04 million units in September, an 8 percent drop from the month before, according to the National Association of Realtors.  That’s also down 19.1 percent from September 2006.

Third quarter sales, however, finished slightly better than expected with a 5.42 million annual rate, compared with the 5.38 million forecast by the association.

The national median existing-home price also dropped, hitting $211,700 — 4.2 percent below September of last year. The fall follows three months of stability comparing year-ago prices, however.

In the West, sales declined 9.9 percent in September and were down 27.8 percent from a year ago. The median price was $308,900 — 8.8 percent lower than September 2006.

A national index tracking builder confidence hit its lowest point since it was started in January 1985 this month.

The National Association of Home Builders sites continuing problems in the mortgage market, large inventories of unsold homes and the impact of negative media coverage on potential buyers as leading to October’s 2-point decline.

“Consumers are still trying to sort out market realities and get the best deals they can,” association chief economist David Seiders said in a statement. “When the market is in proper balance, people can recognize a good deal when it comes along; at this point, they view a good deal as a moving target.”

The index, which is co-produced by Wells Fargo, looks at  builder perceptions of current home sales, sales expectations for the next six months and potential buyer traffic.

One positive sign from the latest survey was that builder expectations for sales conditions in the next six months held steady.

“Builders believe they are taking the right steps to reduce inventories and position themselves for the market recovery that lies ahead,” Seiders said.

Nationwide, home construction starts dropped to their lowest level in more than 14 years, according to the U.S. Department of Commerce.

Housing starts hit a seasonally adjusted annual rate of 1.191 million last month, 10.2 percent below August and down 30.8 percent from September 2006. It was the lowest pace for home starts since March 1993 with a rate of 1.083 million units, Reuters News reported.

Developers also took out fewer residential building permits in September at a seasonally adjusted annual rate of 1.226 million, down 7.3 percent from August and 25.9 percent below a year ago.

The Valley’s office market is continuing to chug along, despite the housing market slump.

Some 3.6 million square feet of new office space will be completed throughout the Valley this year — the most since 2001 when 4.5 million square feet was delivered, according to a new report from commercial brokerage CB Richard Ellis.

And nearly half of the 3.55 million square feet of space currently under construction is located in three areas: the Scottsdale Airpark, Phoenix Sky Harbor and Glendale, the report shows.

In addition to Scottsdale, activity is bustling in other areas of the southeast Valley. Hot spots lie along the loops 101 and 202 in Chandler and Gilbert. The southeast currently has 890,793 square feet of office space under construction.

Some 8,062 foreclosure filings — including default notices, auction sale notices and bank repossessions — were recorded in Arizona last month, an 8.5 percent drop from August.

Despite the slight improvement, September foreclosures were still up 177 .8 percent from the same month in 2006, according to a new report from research firm RealtyTrac. Arizona ranked No. 5 on the company’s latest list of states with the highest foreclosure rates.

Here are the rest of the top 10 in order:

nbsp;Forbes.com recently labeled Phoenix one of the best places for real estate deals.

Tens of thousands of homes are on the market right now and foreclosures are rising, but analysts say that the Valley is one of several metropolitan areas that are more likely to see sales pick up.

Phoenix ranked No. 9 on the Forbes list. Here are the rest of the top 10: Fort Worth, Texas (No. 1); Kansas City, Mo. (No. 2); Houston (No. 3); Cleveland (No. 4); Denver (No. 5); Long Island, N.Y. (No. 6); Washington D.C. (No. 7); Orlando (No.8) and Las Vegas (No. 10).

The House of Representatives voted last week to approve a piece of legislation that would eliminate a tax consequence for homeowners who have had a loan forgiven or had their home foreclosed on because they couldn