WASHINGTON (AFP) - Existing US home sales surged 9.4 percent in September as consumers scrambled to take advantage of an expiring tax credit for first-time buyers, industry figures showed Friday.

The National Association of Realtors said sales of previously owned homes and apartments jumped to a seasonally adjusted annual rate of 5.57 million units, well ahead of expectations for a pace of 5.35 million.

The report showed sales at the highest level in over two years for the troubled sector at the epicenter of the global financial crisis.

"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 association 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, because the rising sales momentum needs to continue for a few additional quarters until we reach a point of a self-sustaining recovery."

The national median price for all housing types was 174,900 dollars in September, 8.5 percent lower than September 2008 and slightly below the August price.

The NAR said "distressed" sales distort the median price because they generally sell at a discount relative to other homes in the same area.

A positive factor came in the reduction in the glut of unsold homes on the market.

Total inventory fell 7.5 percent to 3.63 million, which represents a supply of 7.8 months at the current sales pace, suggesting supply and demand are coming closer to balance.

The market has been benefitting from the tax credit of 8,000 dollars for first-time buyers that expires at the end of the year. Many buyers are rushing to sign contracts to be sure to close the deal before the credit expires.

Sales rebounded after a 2.7 percent drop in August.

Even with the improvement, Yun said the real estate market is not out of the woods after its collapse that hit the worldwide financial system which had been betting heavily in the sector.

"Despite spectacular gains in the stock market, principally from the financial sector recovery, most of the 75 million home owning families have more wealth tied to their homes," Yun said.

"We're getting early indications of price stabilization, but we need a steady supply of qualified buyers to meaningfully bring inventories down and return us to a period of normal, steady price growth and to fully remove consumer fears, which would then revive the broader economy."

Ryan Sweet at Moody's Economy.com said the recovery in housing cannot be sustained without an extension of the tax credit.

"The market is still oversupplied, and months' supply needs to fall to four to five months to be considered normal, something that will not happen quickly," he said.

"With the foreclosure pipeline filling and the labor market deeply troubled, the risks to the outlook for housing remain to the downside."

But Brian Wesbury, economist at First Trust Portfolios, argued that the sector appears to be on the mend even if the tax credit is not renewed.

"If the credit is allowed to expire, home sales will probably dip temporarily in the following months," he said.

"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 and should expect modest price gains in much of the country over the next couple of years."