Existing-home sales rose 6.8 percent in March

Sales of previously owned homes surged in March, in part because buyers rushed to take advantage of a soon-to-expire tax credit, though affordable prices and low interest rates also played a role, according to an industry report released Thursday.

Existing-home sales jumped 6.8 percent in March from February, to a seasonally adjusted annual rate of 5.35 million units, the National Association of Realtors reported. Sales were up 16 percent from the comparable period a year earlier, the group said.

Every U.S. region experienced gains, led by a 7.2 percent increase in the Midwest. The uptick has helped clear out an excess supply of homes on the market, a key step toward stabilizing prices.

The report highlighted an $8,000 tax credit available to some first-time home buyers and a $6,500 tax credit available to certain homeowners who buy a new primary residence as key elements in having juiced sales. To qualify for either refund, buyers must sign a contract by April 30 and close by June 30. A similar program was available last year.

"The tax credit is giving us a shot in the arm, but a smaller one than the last go-round," said Michael D. Larson, an analyst with Weiss Research. "But it's not all related to the tax credit. The overall market is stabilizing because housing is cheap again, financing is low and the tightening of [lending] standards is not tightening further."

Larson said the March sales rate of roughly 5 million units is in line with the traditional numbers dating back to late 2007, except for a dramatic sales drop in 2008 when the credit market imploded, and a sales spike in late 2009 fueled by the first tax credit.

But some economists point to a rough road ahead. "Once the credit expires, sales are likely to fall again because of a fundamental weakness of demand linked to the high unemployment rate, low income growth and heavy household indebtedness," Paul Dales, an economist for Capital Economics, wrote in a note to clients on Thursday.

If sales continue at the March pace, there will be an eight-month supply of homes to sell, down from February's 8.5-month supply. Inventory has been shrinking for 20 consecutive months, the Realtors group said. Typically, a six-month supply suggests a stable market.

The national median price of a home was $170,000 last month, up from $165,100 in February but flat compared with March 2009. In the Washington area, the median price of a single-family home shot up 12.5 percent from a year earlier to $298,900.

Nationally, distressed properties sold for about 15 percent less, and made up about 35 percent of sales in March and February.