Extraordinary government efforts to stabilize the housing market are paying off. What happens when the help runs out is anyone's guess.
Sales of previously occupied homes surged in November to the highest level in nearly three years, spurred by federal subsidies for starter homes and a massive Federal Reserve push to drive down mortgage rates.
The strong figures were driven by a race to take advantage of a tax credit of up to $8,000 for first-time homebuyers. The credit has since been extended to next spring, but the government initially planned to end it Nov. 30.
"It was like the end of the world," said real estate agent Stephanie Somers of Re/Max Access in Philadelphia. "All the first-time buyers converged onto that one month."
The pace of home sales is now up 46 percent from its bottom in January and still 10 percent shy of its peak from four years ago, according to data released Tuesday by the National Association of Realtors.
The real estate recovery depends not only on taxpayer dollars but also on the health of the economy at large, which grew at a less robust pace in the third quarter than previously thought.
The economy grew at a 2.2 percent annual pace from July to September, down from an initial reading of 2.8 percent, the government said Tuesday.
Experts think the economy is even stronger now than it was last quarter, but they expect it to ebb again early next year. And that's when the tax credit will wind down and the Fed plans to stop buying mortgage-backed securities, which could raise mortgage rates.
Whether the real estate rebound can continue without the help remains to be seen.
"The housing market recovery can't continue if the overall recovery in the economy doesn't persist," said Michelle Meyer, an economist with Barclays Capital.
While prices for homes in many parts of the country are still falling, analysts said the tax credit clearly helped the volume of sales.
"In the short run, it's an effective stimulus," said John Ryding, chief economist at RDQ Economics. "If you give someone money to spend on something, they will spend it."
With April 30 as the new deadline, experts forecast sales will drop during the winter and pick up again in the spring. Without the looming deadline, "buyers have no sense of urgency now," said Gary DeRosa, an agent with ZipRealty Inc. in Seattle.
About 2 million homebuyers have taken advantage of the credit so far, the Realtors group said. It expects 2.4 million more to use it by the middle of next year. First-time buyers made up about half of all transactions last month, driving sales up 44 percent above last year's levels, a record.
Overall, sales of existing homes rose 7.4 percent in November to a seasonally adjusted annual rate of 6.54 million, up from 6.09 million in October. That was far stronger than the 6.25 million forecast by economists surveyed by Thomson Reuters.
The inventory of unsold homes on the market shrank about 1 percent to 3.5 million. That's a healthy supply of about six and a half months' worth, the smallest in three years.
That home prices are still falling shows one government housing program, an effort to get lenders to prevent foreclosures by lowering monthly payments for hundreds of thousands of borrowers, isn't working as well as the Obama administration would like. Only about 31,000 borrowers have completed the process so far.
In the meantime, high unemployment is causing homeowners to default on their loans in record numbers. Banks are unloading foreclosed homes, driving prices down in many areas, particularly Arizona, California, Florida and Nevada.
Nationwide, the median sales price was $172,600 in November, down 4 percent from a year earlier, but flat from October.
Many experts warn that lenders have millions of properties in the foreclosure pipeline that have yet to come on the market, suggesting prices could fall even further. Plenty of traditional sellers are also keeping their homes off the market.
"When they start thinking they can sell them, we could see a surge in homes for sale," wrote Joel Naroff, president of Naroff Economic Advisors.
In the meantime, homebuyers can take advantage of record-low mortgage rates, deeply discounted prices and federal incentives. Besides the tax credit for first-time buyers, owners who have lived in their homes for at least five years can now claim a tax credit of up to $6,500 if they relocate. To qualify, they have to sign a purchase agreement by April 30.
Real estate agent Tim Surratt of Grenwood King Properties in Houston said activity has remained healthy this month, even only days before Christmas. "The window to purchase where the prices are right and the interest rate is right is closing," he said.
AP Economics Writer Jeannine Aversa in Washington and AP Real Estate Writers J.W. Elphinstone in New York, Alex Veiga in Los Angeles and Adrian Sainz in Miami contributed to this report.