The National Association of Realtors says sales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.
It was the highest sales level since February 2007. Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.
The median sales price was $173,100 down 7.1 percent from a year earlier, and off 1.6 percent from September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline, said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.
The new deadline means that "we're going to see some good activity coming out of the spring," he said.
Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal interventions to lower mortgage rates and bring more buyers into the market.
But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.
Much uncertainty remains, especially if unemployment keeps rising from the current level of 10.2 percent. And the government's ability to prop up housing is limited.
For example, the Federal Reserve is likely to curtail its effort to push down mortgage rates next year. If rates then rise too high, it would make home purchases less affordable and dampen housing demand.
"When we do kick those crutches out from under the housing market, will it be able to stand on its own?" said Mark Fleming, chief economist with real estate information company First American CoreLogic. "It's really hard to tell."
Foreclosures also are a growing problem. The Mortgage Bankers Association said last week that a record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. Driven by rising unemployment, fixed-rate loans made to borrowers with good credit accounted for nearly 33 percent of new foreclosures last quarter. That compares with 21 percent a year ago.
The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.