WASHINGTON – First-time buyers taking advantage of a special tax credit gave sales of existing homes their biggest surge in a decade, raising hopes for a turnaround in the housing market and pleasing Wall Street.

While rising foreclosures and disappearing jobs still threaten the comeback, there are now bidding wars for houses in some cities, and home sales are nearly 36 percent above their low point in January.

Analysts said the gains in October mainly reflected the tax credit of up to $8,000 for new homeowners, which was due to expire this month before Congress extended it until spring – and expanded it to more buyers.

The sales figures Monday from the National Association of Realtors provided the juice for a rally on Wall Street. The Dow Jones industrial average, also lifted by a weak dollar, rose more than 130 points.

Analysts said the extension of the homebuyer tax credit could help sustain the housing market next year. Yet the economy will probably benefit only slightly from higher home sales.

That’s because there are still too many factors weighing down the recovery. Foreclosures are rising. Job creation is slow. People remain reluctant to spend. And construction of new homes – as opposed to sales of existing ones – plunged in October.

The biggest contribution the housing industry makes to economic growth is from home building. Commissions and fees generated from home sales also help, but far less than construction.

“I wouldn’t want to bet the house on housing, really, in terms of the strength of the U.S. economy going forward,” said Diane Swonk, chief economist at Mesirow Financial in Chicago.”

The Realtors group said resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from 5.5 million in September. It was the biggest monthly increase in a decade and far better than what economists expected, according to Thomson Reuters.

At the current sales pace, there’s a modest seven-month supply of previously occupied homes on the market. Sales are still running 16 percent below their peak in 2005, but real estate agents say the pace has definitely picked up.

“People who are looking, they are serious,” said Harrison Tulloss of Zip-Realty Inc. in Raleigh-Durham, N.C. “They’re not riding around with me if they need to go shopping or buy a turkey.”

Associated Press writers Alex Veiga, Adrian Sainz and David Twiddy contributed to this story.