Home resales rose in September to the highest level in more than two years, beating expectations, as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.
The National Association of Realtors reported that sales rose 9.4% to a seasonally adjusted annual rate of 5.57 million in September, from a downwardly revised pace of 5.1 million in August. Sales had been expected to rise to an annual pace of 5.35 million.
The median sales price was $174,900, down 8.5% from a year earlier, and slightly lower than August's median of $177,300.
The inventory of unsold homes on the market fell about 7% to 3.63 million. That's a 7.8 month supply at the current sales pace, the lowest level since March 2007. Nationwide sales are up nearly 24% from their bottom in January, but are still down 23% from four years ago.
Sales rose around the country, especially in the West, where they grew 13% from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas.
First-time home buyers and investors are snapping up those homes and taking advantage of low mortgage rates. First-time buyers can also take advantage of a tax credit of 10% of the sales price, up to $8,000, if the sale is completed by the end of November.
The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30.
While home sales and housing construction have risen steadily after hitting bottom earlier this year, most economists believe that the worst isn't over for home values.
Prices could see a double dip because rising unemployment is causing more foreclosures. The jobless rate, currently at 9.8% is expected to rise as high as 10.5% next year, causing more people to be unable to afford their monthly mortgage payment.