Sales of existing US homes climbed in September to the highest level in more than two years as first-time home buyers rushed to take advantage of a tax credit before it runs out. The National Association of Realtors reported that purchases jumped 9.4% to a 5.57 million annual rate, which was more than the 5.09 million rate in August and above economists’ forecasts of a 5.35 million annual rate.

First-time home buyers are taking advantage not only of low mortgage rates but also of the tax credit which gives buyers a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by November 30th. The rapid gain in home sales over the past few months is due in large part to the $8,000 tax credit.

The concern is that once the tax credit expires at the end of November, home sales will evaporate much as auto sales did once the Cash for Clinkers program was over. Congress is currently considering whether to extend the tax credit through to June 30, 2010, expand it to all home buyers and perhaps even to increase the amount of the tax credit up to $15,000.

The housing market is enduring its worst slump since the Great Depression. The $8,000 tax credit seems to have stabilized the housing market for now, but at very low levels. The question whether to extend the program may come down to its cost. There have been many fraudulent claims for the credit filed under the current program. Critics have stated that the current $8,000 subsidy actually costs $43,000 per extra house sold.