IRS Clarifies What's Needed to Claim Tax Credit...
The Internal Revenue Service has clarified which documentation taxpayers need to submit to claim the first-time and move-up homebuyer tax credit.
While the IRS is still requiring the filing of Form 5405, it is not demanding that all parties’ signatures be on the HUD-1 settlement document in areas where requiring both the buyer and the seller to sign the document isn’t common.
The IRS clarification says: "In areas where signatures are not required on the settlement document, the IRS has clarified that it will accept a settlement statement if it is completed and valid according to local law. … The IRS encourages those buyers to sign the settlement statement prior to attaching it to the tax return.”
For repeat buyers, the IRS is seeking documentation that home buyers have lived in the previous property for a consecutive five of the past eight years. Proof can include property tax records, home owner insurance records, or mortgage interest statements.
Tuesday, February 23, 2010
Thursday, February 11, 2010
Fourth Quarter Home Sales Surge 13.9% ...
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Strong gains in existing-home sales were the predominant pattern in most states during the fourth quarter, with many more metro areas seeing prices rise from a year earlier, according to the latest survey by the NATIONAL ASSOCIATION of REALTORS®.
Sales increased from the third quarter in 48 states and the District of Columbia; 32 states saw double-digit gains. Year-over-year sales were higher in 49 states and D.C.; all but three states had double-digit annual increases.
Total state existing-home sales, including single-family and condo, jumped 13.9 percent to a seasonally adjusted annual rate of 6.03 million in the fourth quarter from 5.29 million in the third quarter, and are 27.2 percent above the 4.74 million-unit level in the fourth quarter of 2008.
Distressed property accounted for 32 percent of fourth quarter transactions, down from 37 percent a year earlier.
Lawrence Yun, NAR chief economist, said the first-time home buyer tax credit was the dominant factor. “The surge in home sales was driven by buyers responding strongly to the tax credit combined with record low mortgage interest rates,” he said. “With inventory levels trending down over the past 18 months, we expect broadly balanced housing market conditions in much of the country by late spring with more areas showing higher prices.”
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage fell to a record low 4.92 percent in the fourth quarter from 5.16 percent in the third quarter; it was 5.86 percent in the fourth quarter of 2008.
In the fourth quarter, 67 out of 151 metropolitan statistical areas reported higher median existing single-family home prices in comparison with the fourth quarter of 2008, including 16 with double-digit increases; one was unchanged and 84 metros had price declines. In the third quarter, only 30 MSAs showed annual price increases and 123 areas were down.
The national median existing single-family price was $172,900, which is 4.1 percent below the fourth quarter of 2008; the median is where half sold for more and half sold for less. “This is the smallest price decline in over two years, with the most recent monthly data showing a broad stabilization in home prices,” Yun said. “Because buyers are taking on long-term fixed rate mortgages, avoiding adjustable-rate products, and trying to stay well within their budgets, the price recovery process appears durable."
NAR President Vicki Cox Golder said near-term market conditions will remain favorable. “Mortgage interest rates are expected to trend up later this year, but right now we have very good conditions with steadying home prices and favorable inventory in most areas, especially in the higher price ranges,” she said.
Golder said one of the biggest issues now is for repeat buyer who will have to accelerate their buying plans if they want the expanded tax credit. They have to have a contract by the end of April.
Repeat buyers do not have to sell their existing home, but all buyers must occupy the property they purchase as a primary residence to qualify for the tax credit. Buyers who have a contract in place by April 30, 2010, have until June 30, 2010, to finalize the transaction to get a credit of up to $8,000 for first-time buyers and $6,500 for repeat buyers.
Markets by Region
South: In the South, existing-home sales rose 13.8 percent in the fourth quarter to an annual rate of 2.23 million and are 28.2 percent higher than the fourth quarter of 2008. The median existing single-family home price in the South was $153,000 in the fourth quarter, down 2.4 percent from a year earlier.
“Affordable markets in the South that have relatively better local economies are seeing healthy price gains, such as Houston, Oklahoma City and Shreveport, La.,” Yun said.
A Closer Look at the Condo Market
Metro area condominium and cooperative prices – covering changes in 54 metro areas – showed the national median existing-condo price was $177,300 in the fourth quarter, down 4.8 percent from the fourth quarter of 2008. Eleven metros showed increases in the median condo price from a year earlier and 43 areas had declines; in the third quarter only four metros experienced annual price gains.
Source: NAR
Friday, January 22, 2010
6 Surprising Facts About the Buyer Tax Credit...
The homebuyer tax credit is not as simple or straightforward as you might think. Here are some nuances that will affect homebuyers who plan to use it.
To qualify for the move-up tax credit, a home owner must have occupied the same principal residence for five of the last eight years consecutively.
Buyers can elect to claim the credit on either their 2009 or their 2010 tax return, whichever is best for them.
Buyers who claim the credit in 2009 can’t file electronically because the Internal Revenue Service hasn’t put the required forms on line. The wait for a refund is three or four months.
The home can be a mobile home or travel trailer that is fixed to land owned or leased by the home owner. A mobile home or travel trailer that is actually mobile doesn’t qualify.
The home can’t be purchased from a close relative, including a parent, spouse, child, grandparent or grandchild.
A buyer who earns no taxable income or doesn’t owe any federal income tax can qualify for the tax credit and file a tax return just to claim it.
Source: Bankrate.com, Marcie Geffner (01/21/2010)
The homebuyer tax credit is not as simple or straightforward as you might think. Here are some nuances that will affect homebuyers who plan to use it.
To qualify for the move-up tax credit, a home owner must have occupied the same principal residence for five of the last eight years consecutively.
Buyers can elect to claim the credit on either their 2009 or their 2010 tax return, whichever is best for them.
Buyers who claim the credit in 2009 can’t file electronically because the Internal Revenue Service hasn’t put the required forms on line. The wait for a refund is three or four months.
The home can be a mobile home or travel trailer that is fixed to land owned or leased by the home owner. A mobile home or travel trailer that is actually mobile doesn’t qualify.
The home can’t be purchased from a close relative, including a parent, spouse, child, grandparent or grandchild.
A buyer who earns no taxable income or doesn’t owe any federal income tax can qualify for the tax credit and file a tax return just to claim it.
Source: Bankrate.com, Marcie Geffner (01/21/2010)
Wednesday, January 20, 2010
IRS Deductions for Georgia Storm and Flood Victims...
Georgians impacted by recent severe storms may be able to increase their standard deduction by claiming their net disaster losses suffered from the federally declared disaster. Provisions of the National Disaster Relief Act allow all taxpayers to claim the casualty loss deduction regardless of their income level. In addition, the law waives a requirement limiting casualty losses to those that exceeded 10% of the taxpayer’s adjusted gross income.
"Eligible taxpayers may be able to deduct disaster losses, even if they don’t itemize, through an increased standard deduction,” said IRS Spokesman Mark S. Green. "This increased deduction is limited to unreimbursed losses. You cannot claim losses that were covered by insurance.”
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A of Form 1040.
The increased standard deduction for disaster losses is a benefit that could help many Georgia residents. More than two-thirds of the returns filed by taxpayers each year claim the standard deduction instead of itemizing deductions.
"It’s also important for taxpayers impacted by this federally-declared disaster to note this on their tax returns,” said Green. "They should write "Georgia/Severe Storms and Flooding” at the top of their tax returns and any other documents filed with the IRS to identify themselves as storm victims eligible for disaster relief.”
For more information on figuring a casualty loss deduction, see IRS Publication 547, Casualties, Disasters and Thefts, and Form 4684 , Casualties and Thefts. Also, the IRS offers Publication 584, a workbook you can use to calculate personal property losses. These helpful forms and publications can be found on the IRS Web site at IRS. gov.
For disaster information call IRS Disaster Hotline at 1-866-562-5227 or call the IRS toll-free number for general tax questions at 1-800-829-1040.
Decatur Dispatch, January 2010
Georgians impacted by recent severe storms may be able to increase their standard deduction by claiming their net disaster losses suffered from the federally declared disaster. Provisions of the National Disaster Relief Act allow all taxpayers to claim the casualty loss deduction regardless of their income level. In addition, the law waives a requirement limiting casualty losses to those that exceeded 10% of the taxpayer’s adjusted gross income.
"Eligible taxpayers may be able to deduct disaster losses, even if they don’t itemize, through an increased standard deduction,” said IRS Spokesman Mark S. Green. "This increased deduction is limited to unreimbursed losses. You cannot claim losses that were covered by insurance.”
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A of Form 1040.
The increased standard deduction for disaster losses is a benefit that could help many Georgia residents. More than two-thirds of the returns filed by taxpayers each year claim the standard deduction instead of itemizing deductions.
"It’s also important for taxpayers impacted by this federally-declared disaster to note this on their tax returns,” said Green. "They should write "Georgia/Severe Storms and Flooding” at the top of their tax returns and any other documents filed with the IRS to identify themselves as storm victims eligible for disaster relief.”
For more information on figuring a casualty loss deduction, see IRS Publication 547, Casualties, Disasters and Thefts, and Form 4684 , Casualties and Thefts. Also, the IRS offers Publication 584, a workbook you can use to calculate personal property losses. These helpful forms and publications can be found on the IRS Web site at IRS. gov.
For disaster information call IRS Disaster Hotline at 1-866-562-5227 or call the IRS toll-free number for general tax questions at 1-800-829-1040.
Decatur Dispatch, January 2010
Tuesday, December 22, 2009
Refinance your home or move?...
By Lori Rozsa • Bankrate.com
While the tumultuous real estate market has many people hunkered down hoping it will all blow over, proactive homeowners are looking beyond the uncertainty. They're weighing a decision about whether to refinance their current mortgage or trade up to a house they couldn't afford three years ago.
Making a move more alluring, interest rates continue to hover at 4 percent to 5 percent and tax credits of up to $8,000 for first-time homebuyers and up to $6,500 for buyers who have been in their homes for at least five of the last eight years consecutively are available.
But before you take the leap, real estate professionals caution that the same basic rules about buying a home still apply.
Here are four questions to ask yourself:
How long do I plan to stay in the new home? (The rule of thumb is at least five years to make a new mortgage worthwhile.)
Do I really need to move or just want to grab a deal? Can I cover the costs to close and relocate? With every winner, there's usually a loser, and you could be both if you find a great deal on a bigger house but can't sell your current home.
If I stay in my current home, does it make sense to refinance and maybe add that extra bedroom or build a deck to improve the property?
Take a deep breath and analyze what you really need, not what the market seems to be telling you to do.
"The decision depends on the individual. Are they looking to move because their family has grown or has their job changed locations, or do they want a shorter commute? Those are reasons to look at buying," says Bernard Markstein, senior vice president of the National Association of Home Builders in Washington, D.C.
But don't move just for the sake of moving, says Elizabeth Blakeslee, an associate broker with Coldwell Banker Residential Brokerage in Washington, D.C. Now is a great time to buy, but prospective homebuyers should make sure that's what they really should do. "You have to figure out your motivating factors," Blakeslee says. "If you're just trying to get a deal, you might want to think about it a little longer. These low interest rates are certainly a consideration for people, but as with every decision in life, you have to ask yourself, 'What is my goal?'"
Markstein says there are several good reasons to buy a house now. "Rates are historically low; it's essentially a buyer's market. And for people moving up, obviously they won't get as much for their own home as they would have a few years ago. But if they're reasonable and set a good price and they find another house at a good price, the two together could be a real benefit," Markstein says. If you're not really looking to move, but you just don't want to miss the real estate bargain boat, Markstein says it might be smarter to stay put.
"If you look around and say, 'I like my neighborhood, I like the schools and the services, I like my house, and I don't really want to move,' then you have two choices," Markstein says. "You can do a simple refi, and that's straightforward and will save you money in most cases. Or if you have enough equity, you can refinance and add a room or upgrade something in your house." Loans based on actual equity homeowners have sunk into their property for years are worth asking about. If you bought your house in the last four years and didn't put much money down, "I'd say forget" refinancing, Markstein says. Home prices are down around 2003 levels.
"If you've been paying your mortgage for six to 10 years, chances are you have built up a lot of equity," he says, "unless you live in one of the real estate-depressed areas, like Detroit or South Florida, Phoenix or Las Vegas."
Refis for home improvement usually pay off if you stay in your home for at least another three years, Markstein says. Again, the time may be right. Contractors' fees have come down substantially from the real estate boom.
Blakeslee says if you're on the fence about whether to sell and move or stay and improve, do your research. Get your credit score. Find out what kind of mortgage you could qualify for. Look at the tax credit deals which expire June 30, 2010 (although binding contracts must be signed by April 30) and figure out your real motivation. If it's just to save money, you could stay where you are and add a little extra to every month's mortgage payment.
"You'd be surprised how that adds up and saves you money in the long run," Blakeslee says.
And if you're determined to take advantage of this buyer's market? "Contact a competent Realtor. Get busy doing your homework. Have them run an analysis for you on prices in your current neighborhood and prices where you're looking to buy," Blakeslee says. "It's a great time to buy, but all the other basics still apply."
Sunday, December 13, 2009
How to Fight for a Lower Tax Bill Through Returns and Appeals...
With the decline of property values many of us have seen in the last several years and with values not expected to increase dramatically in the near future, many homeowners are faced with the reality that the market value of their homes may be less than their assessed tax value. Our local newspaper, The Atlanta Journal and Constitution recently published what we consider an excellent series of articles on this reality and how you may appeal your tax appraisal if you feel this is the case with your home.
Here are some steps that you could take to perhaps help you pay less:
1. Look at your 2009 property tax bill. If you cannot locate it, you can look it up online. Many counties have searchable databases of residential property.
Metro tax assessors enable you to search for data on individual properties countywide.
Clayton: http://weba.co.clayton.ga.us:8003/indextcm.shtml
Cobb: http://www.cobbtax.org/Search/GenericSearch.aspx?mode=PARID
DeKalb: http://web.co.dekalb.ga.us/taxcommissioner/search.asp
Fulton: http://www.fultoncountytaxes.org/fultoniwr/11_depts_property_taxes.asp
Gwinnett: http://gwinnetttaxcommissioner.manatron.com/Tabs/ViewPayYourTaxes.aspx
2. Check the ZIP code map to see how your house compares with the rest of your ZIP on sales and tax values. Also, what do you know about sales of other homes in your neighborhood? Do home values seem to be going down? If so, the county may have overvalued your house for tax purposes. If you think that’s the case, go to step 3.
3. File a form called a property tax return. List what you think your house is worth as of Jan. 1, 2010. Section C asks you to list last year’s “fair market value” on your land and on your house. Then it asks you to list the value of the land and the house this year. This is where you tell the county the value of your property has gone down. You must send the form to your county tax assessor by April 1. (DeKalb and Gwinnett residents must file by March 1.) The assessor reviews your return and decides whether it reflects your property value. Usually you will receive a response between April and June.
If the county turns you down, you have the right to appeal. This gets a little tricky, but ... you also have the right to appeal if the county reappraises your property (whether you filed a return or not). But if the county doesn’t reappraise, and you didn’t file a return, you can’t appeal. This didn’t matter so much when tax valuations often were lower than actual value. Now, however, tax values are often greater than what your house is worth, which means you’ll be paying too much in taxes. So it’s in your interest to file a return.
File your appeal within 30 to 45 days of receiving your notice (counties have different deadlines). First stop: the county board of assessors. If you can’t reach agreement there, next stop is 1) a Board of Equalization, which is a panel of county residents that hears appeals unresolved at the assessor level, or 2) arbitration. There are two kinds, binding and nonbinding. After that, you may appeal to your county superior court. Note that both arbitration and appealing to superior court carry fees.
More info on appeals: https://etax.dor.ga.gov/ptd/adm/taxguide/appeals.aspx
With the decline of property values many of us have seen in the last several years and with values not expected to increase dramatically in the near future, many homeowners are faced with the reality that the market value of their homes may be less than their assessed tax value. Our local newspaper, The Atlanta Journal and Constitution recently published what we consider an excellent series of articles on this reality and how you may appeal your tax appraisal if you feel this is the case with your home.
Here are some steps that you could take to perhaps help you pay less:
1. Look at your 2009 property tax bill. If you cannot locate it, you can look it up online. Many counties have searchable databases of residential property.
Metro tax assessors enable you to search for data on individual properties countywide.
Clayton: http://weba.co.clayton.ga.us:8003/indextcm.shtml
Cobb: http://www.cobbtax.org/Search/GenericSearch.aspx?mode=PARID
DeKalb: http://web.co.dekalb.ga.us/taxcommissioner/search.asp
Fulton: http://www.fultoncountytaxes.org/fultoniwr/11_depts_property_taxes.asp
Gwinnett: http://gwinnetttaxcommissioner.manatron.com/Tabs/ViewPayYourTaxes.aspx
2. Check the ZIP code map to see how your house compares with the rest of your ZIP on sales and tax values. Also, what do you know about sales of other homes in your neighborhood? Do home values seem to be going down? If so, the county may have overvalued your house for tax purposes. If you think that’s the case, go to step 3.
3. File a form called a property tax return. List what you think your house is worth as of Jan. 1, 2010. Section C asks you to list last year’s “fair market value” on your land and on your house. Then it asks you to list the value of the land and the house this year. This is where you tell the county the value of your property has gone down. You must send the form to your county tax assessor by April 1. (DeKalb and Gwinnett residents must file by March 1.) The assessor reviews your return and decides whether it reflects your property value. Usually you will receive a response between April and June.
If the county turns you down, you have the right to appeal. This gets a little tricky, but ... you also have the right to appeal if the county reappraises your property (whether you filed a return or not). But if the county doesn’t reappraise, and you didn’t file a return, you can’t appeal. This didn’t matter so much when tax valuations often were lower than actual value. Now, however, tax values are often greater than what your house is worth, which means you’ll be paying too much in taxes. So it’s in your interest to file a return.
File your appeal within 30 to 45 days of receiving your notice (counties have different deadlines). First stop: the county board of assessors. If you can’t reach agreement there, next stop is 1) a Board of Equalization, which is a panel of county residents that hears appeals unresolved at the assessor level, or 2) arbitration. There are two kinds, binding and nonbinding. After that, you may appeal to your county superior court. Note that both arbitration and appealing to superior court carry fees.
More info on appeals: https://etax.dor.ga.gov/ptd/adm/taxguide/appeals.aspx
Friday, October 23, 2009
Home resales rose in September...
Home resales rose in September to the highest level in more than two years, beating expectations, as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.
The seasonally adjusted annual rate of 5.57 million in September, from a downwardly revised pace of 5.1 million in August. Sales had been expected to rise to an annual pace of 5.35 million, according to economists surveyed by Thomson Reuters.
The median sales price was $174,900, down 8.5 percent from a year earlier, and slightly lower than August's median of $177,300.
"There's a mini-boom going on in the housing market," said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.
The inventory of unsold homes on the market fell about 7 percent to 3.63 million. That's a 7.8 month supply at the current sales pace, and the lowest level since March 2007. Nationwide sales are up nearly 24 percent from their bottom in January, but are still down 23 percent from four years ago.
Sales rose around the country, especially in the West, where they grew 13 percent from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas. First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by the end of November.
The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30.
While home sales and housing construction have risen steadily after hitting bottom earlier this year, most economists believe that the worst isn't over for home values.
Prices could see a double dip because rising unemployment is causing more foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to be unable to afford their monthly mortgage payment.
"There's more supply that's going to come into the marketplace," said Stan Humphries, chief economist at real estate Web site Zillow.com. "That additional supply will outpace demand."
With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.
Realtors and homebuilders are pressing lawmakers to do so, arguing that the tax credit is crucial to get the housing market back on its feet. "We are not there in terms of removing the consumer fear factor," said Lawrence Yun, the Realtors' chief economist.
One potential roadblock, however, emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent. At a hearing on Thursday the Treasury Department's inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old.
Home resales rose in September to the highest level in more than two years, beating expectations, as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.
The seasonally adjusted annual rate of 5.57 million in September, from a downwardly revised pace of 5.1 million in August. Sales had been expected to rise to an annual pace of 5.35 million, according to economists surveyed by Thomson Reuters.
The median sales price was $174,900, down 8.5 percent from a year earlier, and slightly lower than August's median of $177,300.
"There's a mini-boom going on in the housing market," said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.
The inventory of unsold homes on the market fell about 7 percent to 3.63 million. That's a 7.8 month supply at the current sales pace, and the lowest level since March 2007. Nationwide sales are up nearly 24 percent from their bottom in January, but are still down 23 percent from four years ago.
Sales rose around the country, especially in the West, where they grew 13 percent from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas. First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by the end of November.
The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30.
While home sales and housing construction have risen steadily after hitting bottom earlier this year, most economists believe that the worst isn't over for home values.
Prices could see a double dip because rising unemployment is causing more foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to be unable to afford their monthly mortgage payment.
"There's more supply that's going to come into the marketplace," said Stan Humphries, chief economist at real estate Web site Zillow.com. "That additional supply will outpace demand."
With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.
Realtors and homebuilders are pressing lawmakers to do so, arguing that the tax credit is crucial to get the housing market back on its feet. "We are not there in terms of removing the consumer fear factor," said Lawrence Yun, the Realtors' chief economist.
One potential roadblock, however, emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent. At a hearing on Thursday the Treasury Department's inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old.
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