US home sales unexpectedly higher

Analysts say the housing market is starting to stabilise

Sales of previously-owned US homes unexpectedly surged last month to the highest level in more than two years.

The National Association of Realtors said sales rose 9.4% to an annual rate of 5.57 million last month, up from a rate of 5.09 million in August.

Analysts had been expecting a rise in the seasonally adjusted annual rate to 5.35 million in September.

The average sale price dropped 8.5% from a year ago to $174,900 (£106,937), the smallest annual drop in 13 months.

'Temporary dip'

Some will see the data as more evidence of a US housing recovery.

However, much of the gain was attributed to a tax credit that is due to expire on 1 December.

"Much of the momentum is from people responding to the first-time buyer tax credit, which is freeing many sellers to make a trade and buy another home," said the association's chief economist Lawrence Yun.

"We are hopeful the tax credit will be extended and possibly expanded to more buyers, at least through the middle of next year."

If the tax credit is not extended, then house sales may fall, analysts said.

"If the credit is allowed to expire, home sales will probably dip temporarily in the following months," said Brian Wesbury at First Trust Portfolios.

"However, the underlying trend will be upward over the next couple of years as potential homebuyers no longer need to fear widespread deep national home price declines."