Home sales see best boost in decade

Analysts say the gains reflect the tax credit for new homeowners.

By Alan Zibel

THE ASSOCIATED PRESS

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First-time buyers taking advantage of a special tax credit gave sales of existing homes their biggest surge in a decade.

While rising foreclosures and disappearing jobs still threaten the comeback, there are now bidding wars for houses in some cities, and home sales are nearly 36 percent above their low point in January.

Analysts said the gains in October mainly reflected the tax credit of up to $8,000 for new homeowners, which was due to expire this month before Congress extended it until spring — and expanded it to more buyers.

The sales figures Monday from the National Association of Realtors provided the juice for a rally on Wall Street. The Dow Jones industrial average, also lifted by a weak dollar, rose more than 130 points.

Analysts said the extension of the homebuyer tax credit should help sustain the housing market next year. Yet the overall economy will probably benefit only slightly from higher home sales.

That’s because there are still too many factors weighing down the recovery. Foreclosures are rising. Job creation is slow. People remain reluctant to spend. And construction of new homes — as opposed to sales of existing ones — plunged in October.

“I wouldn’t want to bet the house on housing, really, in terms of the strength of the U.S. economy going forward,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.”

The Realtors group said resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from 5.5 million in September.

Many experts predict prices will hit a new low next spring, perhaps falling 5 percent to 10 percent further as more foreclosures spill into the market. The government has tried to counter that trend by offering the tax credit and keeping mortgage rates low.

RECENT NEWS ON HOME SALES
Nov. 17: Homebuilder's survival a matter of timing
Nov. 4: Recent sales on upswing
Oct. 5: Home sales up from Aug., just miss Sept. '08

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