Fueled by the soon-to-expire $8,000 first-time homebuyer tax credit, sales of existing homes jumped in September - registering their biggest monthly percentage increase since 1983.
Compared with August, sales rose 9.4 percent last month to an annual rate of 5.57 million units, the highest level in more than two years, the National Association of Realtors (NAR) reported Friday. Existing-home sales have now risen during five of the past six months.
Sales of previously-owned homes were up 9.2 percent compared with September 2008. Following a year of double-digit dips, the median home price declined just 8.5 percent to $174,900 last month from $191,200 in September 2008. It was the smallest year-over-year price decline in 13 months.
The year-over-year sales gains were both broad-based and robust throughout the country. Compared with a year ago, September sales were up 12 percent in the Northeast, 11 percent in the South, 8 percent in the Midwest and 6 percent in the West.
Home prices in the Midwest were down just 1 percent over the year. In the West, where the 2006 housing bubble was quite inflated and where recent foreclosures have been especially brisk, home prices were down 15 percent.
The number of houses on the market shrank 7.5 percent to 3.63 million in September. At the current sales pace, that inventory level represents 7.8 months’ supply, the lowest since March 2007.
“The tax credit for first-time homebuyers is pumping up demand, and September sales numbers reflected this,” said Patrick Newport, U.S. economist for IHS Global Insight. “The tax credit expires Nov. 30 and, unless it is extended and expanded, sales will take a hit and house prices, which have stabilized recently, will start falling again.”
An annual study of homebuyers by the NAR reveals that first-time buyers accounted for more than 45 percent of home sales during the past year.
Congress is considering extending the tax credit. A bipartisan push is on in the Senate. Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Sen. Johnny Isakson, Georgia Republican and a former real estate agent, are calling for an extension of the credit through June.
In addition to the tax credit and falling home prices, housing has become more affordable during the past year because of historically low mortgage rates. According to mortgage-financing giant Freddie Mac, the average interest rate for a 30-year, conventional, fixed-rate mortgage was 5.06 percent in September, down nearly 1 percentage point from September 2008.
While home affordability has improved, the wealth situation for much of the middle class remains battered from the recession and the longer-running collapse in home prices. Household net worth has plunged nearly $11 trillion since the end of 2007, according to Federal Reserve data.
“Without a firm foundation for middle-class wealth recovery, the post-recession economic growth likely will be one of the weakest in U.S. history,” said Lawrence Yun, chief economist for the NAR.
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