Home sales jump 9.4 percent to highest level in two years

Existing home sales jumped 9.4 percent in September to their highest level in two years, fueled by first-time home buyers pouncing on cheap prices and an $8,000 tax credit, according to industry data released Friday morning.

Sales of existing homes, including condos and single-family residences, reached an annual rate of 5.57 million units in September, their highest level since July 2007, according to the National Association of Realtors. That is better than what analysts were expecting and up 9.2 percent from the same period a year ago.

Sales were up throughout the country. In the South, which includes the Washington region, sales rose 9 percent last month.

"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 group's chief economist, said in a statement.

The $8,000 tax credit expires at the end of next month, and industry lobbyists are pushing Congress to extend and expand the program. Without it, the sales momentum could be derailed before the housing sector can make a substantial recovery, the industry argues.

"We would expect higher sales levels to persist through October and into November before collapsing in December if the credit is not extended," Adam G. York, an economist for Wells Fargo, said in a research note.

But some analysts have questioned whether the pickup in sales is being fueled by the tax credit or falling home prices and low interest rates. The tax credit may be pushing some potential buyers to purchase homes earlier than they otherwise would have, rather than generating new sales, they say.

For example, the data showed that although first-time buyers accounted for 31 percent of home purchases in September, similar to previous months, distressed sales, such as foreclosures, accounted for 29 percent of sales, according to a research note from Abiel Reinhart, an analyst with J.P. Morgan Chase Bank. The importance of the tax credit "is far from clear-cut," Reinhart said.

The industry data showed that the inventory of homes on the market fell again, but so did home prices. The national median existing-home price fell to $174,900 in September, 8.5 percent below its level during the same month last year. Although data have shown that home prices in some parts of the country are stabilizing, some economists have argued that rising unemployment will push more borrowers into foreclosure and ultimately dump more homes on the market, dragging down prices again.