Home sales hit 26-year high in September

Motivated first-time buyers racing toward the Nov. 30 deadline for an $8,000 tax credit propelled sales of previously owned homes in September to the highest monthly gain in 26 years.

Sales rose 9.2 percent over the same month in 2008 and 9.4 percent from August, the National Association of Realtors reported yesterday.

Since February, more than 340,000 qualified first-time buyers have taken advantage of the credit, which is retroactive to Jan. 1.

Recognizing how critical the tax credit has been to a market on life support since the end of the national real estate boom in 2006, the housing industry has been pressuring Congress to extend it for another year and make it available to all buyers except investors and second-home purchasers.

"We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year, because the rising sales momentum needs to continue for a few additional quarters, until we reach a point of a self-sustaining recovery," said Lawrence Yun, chief economist for the Realtors' group.

Economists agree that continuing the tax credit - estimated to cost the government an additional $1 billion - is key to a housing recovery, now forecast for the second half of 2010.

The Realtors' group report "raises almost as many questions as it answers," said Joel L. Naroff of Naroff Economic Advisers in Bucks County. "Clearly, the housing market is in much better shape than six months ago, when demand hit rock bottom. But aid from government incentives is disappearing, and how much demand will fall is somewhat unclear."

Unless the tax credit is both extended and expanded, economist Patrick Newport of IHS Global Insight said, sales will take a hit and "house prices, which have stabilized recently, will start falling again."

Newport says he expects the credit also will have boosted new-home sales when the September data are released by the Commerce Department on Wednesday.

Although the eight-county Philadelphia region also is benefiting from the credit for first-time buyers, September sales year-over-year were basically flat, data collected by Prudential Fox & Roach's HomExpert Market Report show.

Sales rose 0.9 percent last month over September 2008. Median prices fell 4.1 percent in that time, to $207,275 from $216,120, reflecting the high percentage of first-timers looking to close deals on lower-priced homes ($350,000 and under) before the credit goes away.

"The majority of my buyers are first-time buyers seeking the tax credit," said Murray Rubin, a Prudential Fox & Roach agent in Marlton.

"Market activity is gaining momentum," he added.

Through September, fixed rates for 30-year mortgages ranged from 4.82 percent to slightly above 5 percent. On Thursday, Freddie Mac reported average 30-year fixed rates at 5 percent.

The previous best monthly percentage gain in sales was in January 1983, as the country was easing out of a recession that had been accompanied by interest rates in the high teens, according to Hanley Wood Market Intelligence.

Last month, median prices nationally fell 8.1 percent year over year, not only reflecting the first-timers in the market but the huge volume of foreclosed houses in Sun Belt and Rust Belt states, where values have plummeted 30 percent to 50 percent from the 2006 peak.

Foreclosure sales are a relatively small percentage of the Philadelphia region's market. Econsult Corp. vice president Kevin Gillen estimates that since the real estate boom ended, prices here have fallen only 12 percent.