Sales of used homes increased by 10.0% to an annual rate of 4.53 million, according to NAR. Economists surveyed by Dow Jones Newswires had expected existing home sales to rise by 5.3% to an annual rate of 4.35 million.
The increase in home sales was the second in a row. In August, resales rose 7.3% to a rate of 4.12 million, revised down from an originally reported 7.6% increase to a 4.13 million rate.
Still, even with this latest increase, existing home sales are well below where they were a year ago. Year-over-year, existing home sales were down 19.1% from an annual rate of a 5.60 million-unit pace in September 2009. Lawrence Yun, the chief economist at NAR, said a 5 million unit pace is the mark he's looking for as a sign that the housing market can once again "stand on its feet."
"It is still much lower than what I would consider to be fully healthy, but at least a recovery is taking place," he said. "It is a natural healing process without that stimulus medicine."
The housing market has had a hard time recovering from the bursting of the industry's bubble. The federal government created a subsidy for first-time home buyers to help the sector, but that tax credit expired last spring, causing home sales to plunge.
And as the housing industry has been struggling to recover, another crisis has emerged. The state and federal government has launched an investigation into foreclosure practices amid growing concerns about mortgage servicers' use of "robo-signers" to approve large numbers of foreclosure documents without reviewing their contents.
Several major banks including Bank of America, Ally Financial Inc.'s GMAC Mortgage and J.P. Morgan had temporarily halted foreclosures, although foreclosures in some states have since resumed.
Bank of America initially insisted there were no problems with the foreclosures, but just acknowledged for the first time some mistakes were made including misspelled names, an incorrect address and a missing signature.
Some have worried the recent concerns over foreclosures will have a chilling effect on an already-struggling housing market.
Meanwhile, low mortgage rates haven't been enough to entice Would-be home buyers thanks to high unemployment and other signs of a still-soft economy.
Prices have fallen since the housing bubble popped. While lower prices are tempting, there is a downside. Some would-be buyers watching prices dropping will wait for a better deal. That hurts sales in the near-term. Another problem is some owners, waiting for prices to rise, will keep their property off the market, adding to inventory. High inventories add more pressure to already depressed home prices.
The data Monday said the median price for an existing home was $171,700 in September. That's down 2.4% from $175,900 in September 2009.
Inventories of used homes decreased by 1.9% at the end of September to 4.04 million available for sale. That represented a 10.7-month supply at the current sales pace, compared with a 12.0-month supply in August.
Regionally in September, existing home sales increased 5.0% in the West compared to the prior month, 10.1% in the Northeast, 10.6% in the South, and 14.5% in the Midwest.