New York, October 25 -- The government’s tax credit for the qualified homebuyers seems to have worked well for the nation’s real estate sector, which has been hit hardest by recession.
Providing the much needed stimulus to the housing sector, the $8,000 tax credit for the first time home buyers has led to a surge in home sales.
Stabilizing housing sector
The data released Friday by the National Association of Realtors (NAR) highlights that the housing sector is increasingly stabilizing across the nation.
Beating analysts’ expectations, sales of existing homes increased 9.4 percent from August to September, the fifth rise in six months.
With this jump, the sales adjusted annual rate of 5.57 million units in the month, after declining to 5.1 million units in August.
Further, the third quarter sales of existing homes have been highest since 2005. Also there has been a 25 percent increase in the sale of new homes compared to the same quarter in the last fiscal year.
The home sales that are still in the process of finalizing have been at the highest level ever in September.
According to analysts, home sales have increased by nearly 24 percent since January, when the housing market had hit its lowest.
Tax credit nearing end
The real estate agents and mortgage lenders have largely credited this increase to home tax credit.
As of now, more than 1.5 million buyers have received tax credit, according to Internal Revenue Service.
But the tax credit will close at the end of November, meaning that buyers will be eligible for the credit only if they close their purchase by Nov. 30 and the prospects of extending it further remain doubtful.
The government has raised concerns over the increasing costs as extending tax credit is expected to cost $1 billion a month. But some lawmakers are backing the extension as they claim that recovery is evident but fragile.
Senate Majority Leader Harry Reid of Nevada has proposed a 13-month extension under which $8,000 tax credit will be provided for four months and gradually the credit will be phased out by the end of next fiscal year.
A vote on the proposal is expected next week, when the Congress will be also discussing whether or not to extend the federal unemployment insurance benefits.