Existing home sales, which ended four straight months of gains with a 1.8 percent decline in August, bounced back in September the National Association of Realtors® (NAR) said today. Sales increased 2.4 percent to a seasonally adjusted annual rate of 5.17 million homes, the highest pace of the year, from the August rate of 5.05 million.

Despite the recovery, sales in September are still 1.7 percent lower than in September 2013.  Existing homes were selling then at a rate of 5.26 million.  

Sales of single family homes rose 2.0 percent to an annual rate of 4.56 million from 4.47 million in August but were 1.9 percent below the annual rate of 4.65 million units a year earlier.  Existing condo and cooperative units sold at a 5.2 percent higher rate than in August, 610,000 units compared to 580,000, but were unchanged from September 2013. 

Lawrence Yun, NAR chief economist, says the improved demand for buying seen since the spring has carried into the fall. "Low interest rates and price gains holding steady led to September's healthy increase, even with investor activity remaining on par with last month's marked decline," he said. "Traditional buyers are entering a less competitive market with fewer investors searching for available homes, but may also face a slight decline in choices due to the fact that inventory generally falls heading into the winter."

The median existing-home price for all existing home sales in September was $209,700, which is 5.6 percent above September 2013 and marks the 31^st consecutive month of annual price gains. The median existing single-family home price was $210,300 in September, up 5.9 percent from September 2013 and existing condos sold for a median of $205,200 in September, 3.2 percent higher than a year ago.

According to Freddie Mac, the average mortgage interest rate for a 30-year, conventional, fixed-rate mortgage rose to 4.16 percent in September from 4.12 percent in August. Despite the slight increase, interest rates are 33 basis points less than a year ago (4.49 percent). 

All-cash sales were 24 percent of transactions in September, up slightly from August (23 percent) but down from 33 percent in September of last year. Individual investors, who account for many cash sales, purchased 14 percent of homes in September compared to 12 percent last month and 19 percent in September 2013. Sixty-three percent of investors paid cash in September.  

"Economic instability overseas is leading to volatility in the stock market and is causing investors to seek safer bets, which will likely keep interest rates in upcoming weeks hovering near or below where they are now," said Yun. "This is welcoming news for consumers looking to buy, although they could temporarily become more cautious by less certain economic conditions."  

The percent share of first-time buyers continues to underperform historically, remaining at 29 percent for the third consecutive month. First-time buyers have represented less than 30 percent of all buyers in 17 of the past 18 months.

Seven percent of September sales were foreclosures and 3 percent were short sales.  Total distressed sales made up 8 percent of the market in August and 14 percent one year ago.  Foreclosures sold for an average discount of 14 percent below market value in September, unchanged from August, while short sale discounts increased to 14 percent from 10 percent.  

The gradually diminishing role of distressed sales is good news for appraisers according to NAR President Steve Brown who said they have faced undue pressure since the downturn.  "An appraisal is an important part of the home buying and selling process," he said. "With foreclosures and short sales falling closer to average levels, appraisers will have fewer distressed sales in their list of comparables when determining home valuations."

Total housing inventory at the end of September fell 1.3 percent to 2.30 million existing homes, a 5.3-month supply at the current sales pace. Despite fewer homes for sale in September, unsold inventory is still 6.0 percent higher than a year ago, when there were 2.17 million existing homes on the market.

The typical property was on the market for 56 days in September compared to 53 days in August and 50 days in September of last year.  Short sales took a median of 116 days to sell while foreclosures and non-distressed homes sold in 59 and 55 days respectively.  Thirty-five percent of homes sold in September were on the market for less than a month.

All major regions except for the Midwest experienced gains in September.  Sales in the Northeast climbed 1.5 percent to an annual rate of 680,000, but remain 1.4 percent below a year ago. The median price in the Northeast was $249,800, which is 4.8 percent higher than a year ago.

In the Midwest, existing-home sales declined 5.6 percent month-over-month to an annual level of 1.17 million and remain 4.9 percent below September 2013. The median price in the Midwest was $165,100, up 4.9 percent from a year ago.

Existing-home sales in the South increased 5.0 percent to 2.12 million, and are now 1.4 percent above September 2013. The median price in the South was $180,900, up 5.1 percent from a year ago.

Existing-home sales in the West jumped 7.1 percent to an annual rate of 1.20 million in September, but remain 4.0 percent below a year ago. The median price in the West was $294,200, which is 4.0 percent above September 2013.