Sales activity rises more than expected in October, by 10.1%, to 6.1 million annual units

NEW YORK (CNNMoney.com) -- Existing home sales surged in October to the highest level in more than 2-1/2 years, according to a real estate industry report issued Monday.

The National Association of Realtors reported that existing home sales rose 10.1% last month to a seasonally adjusted annual rate of 6.1 million units, up from the downwardly revised rate of 5.54 million in September.

The sales beat forecasts of 5.7 million annual units, according to a consensus estimate of analysts compiled by Briefing.com, and were 23.5% above the 4.94 million-unit pace of 12 months ago.

Sales activity is the highest since February 2007, when the annual rate was 6.55 million.

The gain was likely due to an influx of buyers looking to take advantage of an $8,000 tax credit that the Obama administration made available for qualified first-time home buyers, the report said.

The tax credit was scheduled to expire at the end of November, but it has been extended to April 30 and expanded to include more home buyers.

"Many buyers have been rushing to beat the deadline ... and similarly robust sales may be occurring in November," NAR chief economist Lawrence Yun said in a statement.

But such a spike means December and early 2010 will probably see a "measurable decline before another surge in spring and early summer," Yun said.

Adam York, economist at Wells Fargo, agreed that "it's really a story of the tax credit, and a payback is inevitable."

Still, October's 10.1% gain "was a big, big jump," York said, and he expects only a 5% decline in the coming months.

"We will certainly will see some pickup into first part of next year," York said. "The expansion of the tax credit could bring in a whole new segment of people to the market."

Price and inventory. The median price of homes sold in October was $173,100, a 7.1% year-over-year drop. Distressed properties comprised 30% of the houses sold during the month.