Nationally, the sale of existing homes rose 9.4% in September. In Florida, sales rose by 34%. Local analysts say it’s a combination of falling prices and the $8,000 first-time homebuyer tax credit that has made all the difference in South Florida.

Housing activity in two counties, Broward County and Palm Beach County, reveal just how active the market is right now in Florida.

According to the Florida Association of Realtors, sales of existing homes in Broward County increased 31 percent in September from a year ago. In fact, Broward’s monthly sales have increased on an annual basis since July 2008. Broward’s median home price in September was $200,000, down 23 percent from a year ago and 8 percent from August. The median price means half of the houses sold for more and half sold for less.

Palm Beach County sales rose 43 percent in September and have risen in 14 of the past 15 months. Palm Beach County’s median price in September was $242,900, down 17 percent from a year ago and 1 percent from August.

When it comes to condo sales, markets in both of these counties remained strong last month with sales increasing dramatically in both counties. In Broward, the median price for a condo fell 40 percent from a year ago to $78,300, the lowest since the Realtors’ group started releasing condo figures in 2006.

The tax incentive has helped to reduce the number of properties on the market. The numbers of homes and condos for sale in both Broward and Palm Beach counties are down close to 30 percent from a year ago, according to the Keyes Co.

While sellers hope prices will stabilize soon, housing analysts cite high unemployment figures and say that prices may keep dropping until mid 2010. One prediction, from Moody’s Economy.com, forecasts that Broward’s prices could sink to $130,000 and that Palm Beach County prices might not hit bottom until the $150,000 range.

Bolstered by first time homebuyers taking advantage of the $8,000 tax credit, the sale of previously-owned homes was up 9.4% in September. “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,” explains National Association of Realtors chief economist Lawrence Yun.

The strongest market regionally was the West, where sales climbed 13%, which was 5.7% higher than last year. Still down 15% from last year, the median price of homes sold during the month was $219,000.

In the Midwest, sales were up by 9.6%, which was 7.8% higher year-over year. Median home price here was $147,600, down 1% since 2008.

Sales in the South were up 9% from August and 10.8% from last September to a rate of 2.6 million. Median home price has dropped 7.6% to $153,500 in the past 12 months.

The slightest rise was in the Northeast, with existing sales up 4.4% from August. The median price there was $234,700, down 7.6% from last year.

“We’re getting early indication 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,” Yun said.

Despite this most recent boost in September, experts say the housing market is still underperforming as home values continue to decline. Nationwide, the median price of homes sold in September was $174,900, falling 8.5% from a year earlier. An influx of distressed properties, foreclosures, and short sales are blamed for the price drop in prices.

To help boost home prices and sales, lawmakers are considering extending the tax credit and expanding it to all but the wealthiest homebuyers. Although few would argue the successful impact the tax credit has had on home sales, senior economist Robert Dye explains that an extension would only induce a temporary effect until the program stopped, similar to the Cash for Clunkers incentive.

“First-time homebuyers don’t represent the bulk of the market and there is strength well beyond them,” said Dye. “If economic indicators such as consumer confidence show improving trends, then experienced homebuyers will stay in the market and take advantage of [the low] prices” even without the credit.

While an extension of the November 30, 2009, deadline for the homebuyer tax credit is actively being considered, it’s not a done deal quite yet. In the meantime, it bears noting what the first time home buyer tax credit has done and continues to do for the real estate market.

Almost 50% of all houses sold last year were bought by first time buyers with the help of the tax credit which was passed earlier this year as part of the economic stimulus package. This has been a huge boost for the housing market. With qualifying income (less than $75,000 for singles and $150,000 for couples), the credit, which does not have to be repaid, is good for up to $8,000, or 10% of the purchase price. Both first time buyers and those who have not owned a home in the previous three years are eligible.

The National Association of Realtors attributes much of the recent home sale activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit. Of those, 350,000 would not have been able to buy a home without it.

With the incentive deadline looming, some market analysts fear that the rise in home sales will take a sharp decline once the tax credit expires. The expiration date of November 30^th applies to closing date, which means that home buyers just starting the process now will not benefit from the tax credit.

On the other hand, there is a growing contingency of support for extending, and even expanding, the buyer’s incentive. For example, Johnny Isakson (R-Ga.) is a former real estate broker who is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions. Others, like Senator Majority Leader Harry Reid and Senate Finance Committee Chairman Max Baucus have proposed the extension of the home buyer’s tax credit through 2010 in which the full $8000 will be received.  The tax credit would then be reduced by $2000 each quarter until expiring at the end of 2010.