Home sales have been boosted by tax credits The annual rate of US new home sales fell unexpectedly in September, raising doubts about the strength of the housing sector's recovery. The Commerce Department said sales fell by 3.6% to a seasonally adjusted annual rate of 402,000 homes, down from a revised 417,000 in August. This marks the first fall in the rate of home sales since March. The median sales price of $204,000 (£124,000) was down by 9.1% from $225,200 a year earlier. Tax credits Some analysts argue that the housing sector has been supported by the $8,000 tax credit for first-time buyers introduced by the government to boost demand for houses. They argue that the latest figures simply reflect the fact that the credit is due to run out on 30 November. Some are afraid housing will fade in 2010. That will not happen unless the labour market fades or does not improve

Cary Leahy, Decision Economics Bernard Markstein at the National Association of Home Builders said the Commerce Department figures "demonstrate the power of the first-time home buyers tax credit". "We just haven't got the economy back to the point where we can step back and say the housing market doesn't need any more support," he added. He believes that home buyers may be wary of buying this close to the deadline in case they do not finalise the purchase in time to qualify for the credit. Brad Hunter at real estate research firm Metrostudy said: "If they don't extend [the deadline] then I think the pullback could be quite significant." But others are rather less concerned about the end of the tax credit. "There are some distortions because of the home buyer tax credit, but we can say that housing sales have bottomed," said Cary Leahy at Decision Economics. "Some are afraid housing will fade in 2010. That will not happen unless the labour market fades or does not improve." Economic recovery New home sales are the second set of downbeat figures released in the US in the past two days. On Tuesday, official figures showed a sharp fall in US consumer confidence, raising concerns about the strength of consumer spending in the run up to Christmas. However, GDP figures released on Thursday are expected to show that the US economy started growing again between July and September.



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