According to the National Association of Realtors (the people who trackthese numbers),the number of existing home sales (that’s the house that you and I live in) increased by a whopping 7.4% nationwide.

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 7.4 percent to a seasonally adjusted annual rate¹ of 6.54 million units in November from 6.09 million in October, and are 44.1 percent higher than the 4.54 million-unit pace in November 2008. Current sales remain at the highest level since February 2007 when they hit 6.55 million.

— from Another Big Gain in Existing-Home Sales as Buyers Respond to Tax Credit

Wooo! Hooo!  Break out the champagne!  Get ready to parrrrteeee!

Wait A Minute  Not so Fast.

The article goes on to explain that the jump in existing home sales (not existing home sale prices)is probably attributable to the first time home buyer tax credit.  You remember, this is the credit that was due to expire on November 30th.  It wasn’t until the middle of November that Congress decided to extend and expand the tax credit for homes buyers to include both the first time buyer and the existing home owner (with certain restrictions).

This is the way it worked:

A lot of first time home buyers were hoping to get an $8,000 tax credit for purchasing their first home.  The catch was that they needed to own that home (i.e. settle on the home) no later than November 30st.  This meant that there were a lot of people who had already entered into legally binding contracts of sale to purchase homes and settle no later than November 30th.  Throughout the entire month of November, people were lined up at the title company waiting to sign on the dotted line to take possession of their new home and their $8,000 first time home buyer tax credit.

What Does This Say About The Future?

Of course, Congress, under pressure from a variety of groups including the National Association of Realtors,10 extended the home buyer tax credit for first time buyers (still $8,000) and expanded the home buyer tax credit to include people who currently own homes ($6,500).  The deadline for the new home buyer tax credit is April 30th.  That’s when all home buyers need to be in a legally binding contract of sale with a settlement date no later than June 30th.  (Click Here for a comparison chart of the qualifications for the tax credit)

So I wouldn’t get excited just yet.  Remember, the current trend is for home sales to increase not home prices.  First time home buyers as well as real estate investors are looking for bargains which means bank owned foreclosures and short sales.  It doesn’t mean you can party like it’s 2005 and that people will be lined up to buy your house.  In fact, there is puh-lenty of inventory on the market for buyers to choose from.

A final quote from the article about the increase in existing home sales:

Lawrence Yun, NAR chief economist, said the rise was expected. “This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead,” he said. “We expect a temporary sales drop while buying activity ramps up for another surge in the spring when buyers take advantage of the expanded tax credit, which hopefully will take us into a self-sustaining market in the second half of 2010. In all, 4.4 million households are expected to claim the tax credit before it expires and balance should be restored to the housing sector with inventories continuing to decline.”

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