Existing-home sales rebounded sharply in September, jumping 9.4%, marking the fifth gain in six months, the National Association of Realtors reported on Oct. 23 (NAR). The jump translates to a seasonally adjusted annual rate of 5.57 million units, compared to 5.1 million in August. Analysts had predicted an increase to 5.35 million units, according to Thomson Reuters (TRI).
A good portion of the sales activity is being driven by the $8,000 tax credit for first-time home buyers that is scheduled to expire at the end of November. Congress is currently looking at proposals to expand the credit and extend it into next year to buoy the housing market, which remains severely depressed compared to recent boom years.
"Much of the momentum is from people responding to the first-time-buyer tax credit, which is freeing many sellers to make a trade and buy another home," Lawrence Yun, the NAR's chief economist, said in a news release. "We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery."
Inventory Dips Below Eight Months Prices remain under pressure due to the large number of foreclosed homes on the market. Distress sales comprised about 29% of the activity in September, the NAR said. The national median existing-home price for all housing types was $174,900 in September, which is 8.5% lower than a year ago.
Paul Dales, U.S. economist for Capital Economics, said the jump in sales more than made up for a surprise fall in August and marks a 26-month high. He estimated that about 30% of the home-sales increase since January is due to the tax credit. "Even if the credit isn't extended, low mortgage rates and much improved valuations should mean that any post-credit fallback is temporary."
Dales noted that the inventory of homes for sale fell from a 9.3-month supply to 7.8 months. "This appears to be supporting prices. Overall, the housing recovery continues, but the pace of the recovery is likely to slow, especially if the tax credit is not extended."
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