By ALAN ZIBEL
AP Real Estate Writer
Washington — Home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.
Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.
“Things are stabilizing,” said Pete Flint, chief executive of real estate Web site Trulia.com. “There is a significant amount of buyer interest out there.”
About 2 million homebuyers have taken advantage of the credit so far, according to the National Association of Realtors on Tuesday. The group forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year’s levels, a record jump.
“In the short run, its an effective stimulus,” said John Ryding, chief economist at RDQ Economics. “If you give someone money to spend on something, they will spend it.”
November’s sales rose 7.4 percent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October, according to the Realtors group. It was the highest level since February 2007. Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.
Sales are now up 46 percent from the bottom in January, but down 10 percent from the peak more than four years ago. The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That’s a healthy 6.5 month supply at the current sales pace, the lowest level in three years.
The median sales price was $172,600, down 4.3 percent from a year earlier, and up 0.2 percent from October.
The housing market recovery, however, still faces strong head winds.
Unemployment is high and employers are going to be slow to rehire because economic growth is weaker than expected.
What’s more, mortgage defaults are still setting records, and lenders are regularly rejecting applications from borrowers who don’t have good credit or enough money for a down payment.
Many observers warn that hundreds of thousands of foreclosed properties have yet to be put up for sale. Plenty of traditional sellers are also keeping their homes off the market, hoping for a better price.
“When they start thinking they can sell them, we could see a surge in homes for sale,” wrote Joel Naroff, president of Naroff Economic Advisors.
In the meantime, homebuyers can take advantage of record-low mortgage rates, deeply discounted prices and federal incentives. Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.
Analysts said they expect that the new tax credit deadline means sales will drop during the winter months and recover in the spring.
Without the looming deadline, “buyers have no sense of urgency now,” said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.