Sales of existing homes rose surged 10.1% to a seasonal adjusted annual rate of 6.10 million units as there was a rush of people closing housing deals before the expiration of the first federal tax credit. The figures blew away forecasts, and with the expansion of the tax credit passed by Congress, there may be further recovery in the housing market as a result. Inventories decreased by 3.7% to 3.57 million, which represented a 7.0 month supply at the current sales pace, which compared to a 8.0 reading in September. The median price of an existing home was 7.1% lower compared to the previous year, as buyers were able to negotiate steep price cuts before purchasing.  Distressed properties accounted for 30% of sales, which continue to downwardly distort the median price. Today’s report is a welcome sign for the housing market following weak housing starts data last week.

From the Release: “Driven by the first-time buyer tax credit, existing-home sales showed another big gain in October with a strong uptrend established over the past seven months, while inventories continue to decline.

Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.” Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place… There is still a large pent-up demand that can be tapped before the tax credit expires.”

Official Release: National Association of Realtors