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.
Local reactionsLarry Underhill, Statesman Realty
"Our market is basically driven by first-time homebuyers and investors. The $8,000 credit is a huge benefit. Inventory remains tight because demand outstrips supply. There is a large backlog of bank-owned homes not on the market. The supply that is available is not enough to satisfy demand.
"My explanation to buyers is it's simple but not easy. It's simple because prices and interest rates are at a historic low. It's not easy because there are a pack of buyers. It's a scramble. Buyers are disappointed a few times before they win.
"More effort is required to put a deal together and bring it to close than in the good years prior to 2005.
"Banks now basically control the real estate market. The majority of home sales that closed are bank-owned. We are starting to see a shift to non bank-owned homes. That's a good sign. People are recognizing the opportunity to sell or move up. This is the new market."
Paul Mertz, owner of the Mertz Company
"The market has been good. It's in a certain price range, and most of it is under $200,000. Most are first-time homebuyers who haven't been able to buy for years. There has been some activity on upper end of the market, but it's quieter. People have to be aggressive on pricing.
"It's a buyer's market for homes over $500,000. If you are under $200,000, maybe not. As far as offers are concerned, I'm not sure if we are ahead of last year for home sales in Lodi. Last year was bigger than previous years.
"Inventory seems to be leveling off. A lot of what is out there are short sales, and those are a lot different to deal with. You've got to get a bank to approve it and it takes a long time.
"While the numbers haven't changed, the type of inventory has changed. It's a different market. It's always some new wrinkle to deal with. If you have patience, property is out there. The biggest thing I advise to my clients is have a lot of patience.
"If you have time and are willing to invest it will pay off. The interest rates are amazing. They will likely go up early next year. Most likely, they will still be pretty good through June. There may be an increase in the third and fourth quarter. It depends on what happens to market."
Ryan Sherman, Sherman Group and president of the Lodi Association of Realtors
"Our market is driven by investors and first-time homebuyers. Lodi's inventory is 40 to 45 percent short sales. That's the frustrating part, because they are harder to close on. I have four on my desk in escrow right now. The shortest time period 100 days. I have one that is 160 days. Buyers get frustrated and go find owner-occupied homes they can act on.
The number of units sold is above what they were last year in Lodi. The homes in the $100,000 to $200,000 price range flattening out, but it's nothing you can hang your hat on and call a trend.
"Nationally, the Fed stopped buying mortgage-backed securities and that keeps interest rates where they are. The program is 85 percent done, and it will stop in first quarter of 2010. Most analysts say interest rates will go up a third or half a point afterwards. Doomsayers say it will go up a full point. The Fed's tax credit for first-time homebuyers will expire in spring as well.
"If you are sitting on the fence because you think things will get better, now is the time to buy. If you have a job or life uncertainty, don't buy for the sake of buying. If you are secure, this is good time to wade into market.
"There are still bank-owned homes not on the market yet, but there isn't going to be a deluge of homes on the market. We sell foreclosures out of our office, and nobody sells more in Lodi than our office. It won't be like the glut of bank-owned homes that hit the market in late-2006.
"I had three released to me last week and that's the first time it's happened in three weeks. It's not part of any grand conspiracy. It's just between the home preservation acts by President Barack Obama and Gov. Arnold Schwarzenegger, banks are under scrutiny to keep people in their homes."