Washington: A rush to cash in tax incentives helped boost sales of existing US homes 10.1 percent in October, according to data Monday showing fresh momentum for the sector at the heart of the economic crisis.
The National Association of Realtors said sales of existing single-family homes and apartments rose to a seasonally adjusted annual pace of 6.10 million units, well ahead of market expectations of 5.7 million.
The data showed a small downward revision to September sales figures, but the October level was 23.8 percent higher than a year ago, when the financial crisis had deepened.
"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November," said association chief economist Lawrence Yun.
"With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer."
Many prospective buyers had been rushing to qualify for an 8,000 dollar tax credit for first time home buyers set to expire November 30.
Congress however voted to extend the credit and expand it to include other home purchases as well.
"We think the story here is that people were rushing to complete transactions -- the numbers are captured at the point of sales closing -- ahead of the then-scheduled expiration of the first-time buyer tax credit on November 30," said Ian Shepherdson at High Frequency Economics.
"We expect another strong number for November, then a sharp drop in sales immediately thereafter, followed by a gradual rebound in the first half of next year."
Michelle Meyer at Barclays Capital said the report suggests buyers are coming back to real estate.
"Although the data have been biased higher from policy measures, we believe this sharp gain signals pent-up demand and a willingness to purchase homes, which is a good sign for the sustainability of the housing recovery," she said.
The report showed home prices remained under pressure. The median existing home price was down 7.1 percent from a year ago to 173,100 dollars in October.
The association said sales prices have been distorted by distressed properties, which accounted for 30 percent of sales in October.
The glut of unsold homes fell in October, in a positive sign for the sector at the heart of the global financial crisis.
Total housing inventory at the end of October fell 3.7 percent to 3.57 million units, a seven month supply at current sales levels.
"The supply of homes on the market is now at the lowest level in over two-and-a half years -- we're getting closer to a general balance between buyers and sellers," Yun said.
The last time the relative housing inventory was this low was in February 2007.
"In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection," Yun said.
The data showed sales of single-family homes, the largest segment, up 9.7 percent while apartments -- condominiums of cooperates -- climbed 13.2 percent.
Aaron Smith at Moody's Economy.com said the latest report suggests "the housing recovery is back on track" after reports showing weakness in new construction.
"Although some recent housing data challenge the forecast for continued increases in home sales and construction over the next few quarters, the latest report on existing home sales leaves us more confident that any weakness in demand will be temporary and that this forecast should be maintained," Smith said.
Bureau Report