By Bob Willis Oct. 23 (Bloomberg) -- Sales of existing U.S. homes climbed in September to the highest level in more than two years as homebuyers rushed to take advantage of a tax credit before it runs out. Purchases jumped 9.4 percent to a 5.57 million annual rate, more than forecast and following a 5.09 rate in August, the National Association of Realtors said today in Washington. The median price fell at the slowest pace in a year. The $8,000 credit for first-time buyers, due to expire Nov. 30, has probably pulled sales and construction forward, signaling housing may cool in coming months. While Congress is considering extending the incentive, lower prices and mortgage rates have contributed to steadying a market that endured the worst slump since the Great Depression. “The rapid gain in home sales over the past few months likely owes in large part to the homebuyer tax credit,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “The bottoming process in the housing market is underway.” Existing home sales were forecast to rise to a 5.35 million annual rate, according to the median forecast of 76 economists in a Bloomberg News survey. Estimates ranged from 5 million to 5.6 million, after an initially reported 5.1 million rate in August. Resales reached a 4.49 million pace in January, their lowest level since comparable records began in 1999. Purchases of existing homes were up 9.2 percent compared with a year earlier. The median price fell to $174,900, down 8.5 percent from a year ago. It was the smallest decrease in 13 months. Less Inventory The number of previously-owned homes on the market dropped 7.5 percent to 3.63 million in September. At the current sales pace, it would take 7.8 months to sell those houses, the lowest level since March 2007. A seven months’ supply is usually consistent with stabilization in prices, NAR chief economist Lawrence Yun said in recent months. The share of homes sold as foreclosures or otherwise distressed properties was 29 percent in September from 31 percent in August, Yun said. Today’s report showed sales of existing single-family homes climbed 9.4 percent to an annual rate of 4.89 million. Sales of condominiums and co-operatives increased 9.7 percent to a 680,000 rate. Purchases increased in all four regions, led by a 13 percent surge in the West. Purchases climbed 9.6 percent in the Midwest, 9 percent in the South and 4.4 percent in the Northeast. Beating Deadline Purchases of previously owned homes, which make up more than 90 percent of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are counted when a contract is signed, and may therefore cool months before the tax credit expires. Buyers must close before the Nov. 30 deadline to be eligible for the tax credit. Last month’s sales were “heavily dependent” on the tax credit, the NAR’s Yun said in a press conference. The Commerce Department’s report on new-home purchases is due Oct. 28. The Realtors’ group and the National Association of Home Builders are lobbying to extend the first-time homebuyers credit on concern demand will wane after it lapses. Lawmakers this week took up the call. Extend Credit “The work of stabilizing the housing market won’t be done” when the credit expires next month, Senate Banking Committee Chairman Christopher Dodd said during a panel hearing. “We still need to use every tool at our disposal to fix this problem.” Dodd, a Democrat from Connecticut, and Republican Senator Johnny Isakson of Georgia, a former real estate agent, urged their colleagues to extend the credit through next June. The Federal Reserve this week said its 12 district banks saw “stabilization or modest improvements” in many areas of the economy, led by housing and manufacturing. “Most districts reported that housing market conditions improved in recent weeks, primarily from a pickup in sales of low-to middle-priced houses,” the Fed said in its Beige Book of economic conditions in September and early October. Housing-related companies are still trying to recover. USG Corp., North America’s largest maker of gypsum wallboard, posted its eighth straight net loss last quarter as sales dropped 32 percent from the same time last year. “The residential housing market appears to have stabilized, but it has done so at a very low level,” Chief Executive Officer William Foote said Oct. 21 on a conference call with analysts. To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net.

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