Sales of existing homes surged in September as buyers raced to take advantage of the tax credit for first-time home buyers before it expires next month.
Nationwide, sales of previously owned homes jumped 9.4% in September to a seasonally adjusted annual rate of 5.6 million from a downwardly revised 5.1 million in August, the National Assn. of Realtors reported Friday.
It was the fifth increase in the last sixth months, and sales activity is at its highest level since July 2007, the association said. Sales typically drop from August to September.
On the downside, home prices continued to skid, weighed down by foreclosures and short sales. Nationally, the median price for an existing home was $174,900, down almost 9% from $191,200 a year earlier and slightly lower than August's median price of $177,300.
Analysts noted that the strong sales pace helped pull the inventory of unsold homes down 7.5% from August. That left the industry with a 7.8-month supply of homes for sale.
Drawing down the inventory of unsold homes "is critical to stemming the decline in prices," Deutsche Bank economist Joseph LaVorgna wrote in a note to clients, adding that "we think the housing market has touched bottom."
Other analysts weren't so sanguine, noting that the home buyer tax credit of up to $8,000 is set to expire Nov. 30, and efforts in Congress to extend it are uncertain.
"This is basically a false bottom driven by a mad scramble caused by the end of the tax credit and artificially low interest rates," said Christopher Thornberg, a principal with Beacon Economics in Los Angeles.
Because the tax credit applies only to home sales that close by Nov. 30, "you basically would have to sign a contract to buy a house today to qualify," said Lawrence Yun, chief economist for the Realtors' association.
The Western region, which includes California, notched the biggest sales increase -- 13% -- of the four regions tracked by the association. It also recorded the biggest year-over-year price drop. The median price in the West was $219,000 last month, 15% below September 2008's median.
Sales rose 4.4% in the Northeast, 9.6% in the Midwest and 9% in the South.