Updated 6:51 p.m. ET
U.S. home resales surged last month to the highest level in nearly three years, reflecting an extraordinary level of federal support that has pulled the housing market back from the worst downturn since the Great Depression.
Buyers were racing to complete their sales before the original expiration date of a tax credit for first-time buyers that was scheduled to expire Nov. 30. Last month, Congress decided to extend and expand the credit to ensure the housing market could sustain its recovery.
"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."
Chicago real estate broker Sally Haynes is bullish about her business. "On many of the deals I'm writing right now, I'm facing multiple offers," she told CBS News correspondent Dean Reynolds. "I think that's a clear sign that peoples' confidence is back."
About 2 million homebuyers have taken advantage of the credit so far, the National Association of Realtors said Tuesday. The group forecasts that another 2.4 million will use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record jump.
Low prices helped too. The median home price is now $172,000, down 4 percent from a year ago. And interest rates are low; a 30-year fixed rate is 4.88 percent compared to 6.09 percent a year ago.
"In the short run, it's an effective stimulus," said John Ryding, chief economist at RDQ Economics. "If you give someone money to spend on something, they will spend it."
November's sales rose 7.4 percent to a seasonally adjusted annual rate of 6.54 million, from a downwardly revised pace of 6.09 million in October, the Realtors group said. It was the highest level since February 2007. Sales had been expected to rise to an annual pace of 6.25 million, according to economists surveyed by Thomson Reuters.
Another Big Gain in Existing-Home Sales (Press Release, 12.22.09)
Sales are now up 46 percent from the bottom in January, but down 10 percent from the peak more than four years ago. The inventory of unsold homes on the market fell about 1 percent to 3.5 million. That's a healthy 6.5 month supply at the current sales pace, the lowest level in three years.
The median sales price was $172,600, down 4.3 percent from a year earlier, and up 0.2 percent from October.
"Affordability is very high, and November also benefited from record-low mortgage rates" Diane Swonk, chief economist for Mesirow Financial, told CBS News.
But industry analysts worry that federal incentives are artificially stimulating a market still facing big problems.
"I would say that we have to be a little cautious," said Nariman Behravesh of IHS Global Insight told Reynolds. "I think the worst of the housing crunch is behind us, but i would not interpret this as somehow or other the beginning of some kind of sustained rally in housing."
That's because unemployment remains high. Economic growth - only 2.2 percent in the third quarter - is weak. And banks are lending only to the most financially qualified customers.
"Things are getting better, but at a much slower rate than the home sale numbers and the surge in home sales would suggest," Behravesh said.
What's more, mortgage defaults are still setting records, and lenders are regularly rejecting applications from borrowers who don't have good credit or enough money for a down payment.
Many experts warn that hundreds of thousands of foreclosed properties have yet to be put up for sale. Plenty of traditional sellers are also keeping their homes off the market, hoping for a better price.
"There's no question that the housing market has hit bottom, and the momentum we're seeing is fairly strong," Swonk told CBS News. "But there's still a very large supply of homes on the market, of vacant homes not yet sold."
"When they start thinking they can sell them, we could see a surge in homes for sale," wrote Joel Naroff, president of Naroff Economic Advisors.
In the meantime, home buyers can take advantage of record-low mortgage rates, deeply discounted prices and federal incentives. Besides the existing tax credit of up to $8,000 for first-time buyers, homeowners who have lived in their current properties for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, buyers must sign a purchase agreement by April 30.
Analysts expect that the new tax credit deadline means sales will drop during the winter months and recover in the spring.
Without the looming deadline, "buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.
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