Sales of existing single-family homes fell 3.6% in September after a 9% spike in August, according to new figures released by the National Association of Realtors.

Sales in the Western U.S. fell by 8% with the trade group blaming lower GSE loan limits for the damage.

NAR reported that sales of previously owned single-family homes fell to a 4.33 million seasonally adjusted annual rate in September from a 4.49 million rate in August.  (The August rate was revised upward by 20,000 units in the new sales report.)

Overall sales — excluding condominiums and cooperatives — are up 12% from a year ago.

The $729,750 maximum loan limit for Fannie Mae and Freddie Mac loans  expired October 1, falling back to $625,500 in high cost areas.

NAR suspects the reduction may have had a larger impact in California and other Western states where prices tend to be higher. Sales in the Northeast were unchanged from August to September.

Some lenders stopped taking applications for higher balance loans in August.  A recent survey of Realtors found that 16% of buyers dropped out of the market due to the higher costs of private financing.

Thursday's report also shows that prices of single-family homes have fallen 4% from a year ago. The median home price was $165,600 in September compared to $171,200 in August.

NAR chief economist Lawrence Yun pointed out that contract cancelations have doubled since September 2010. In September 18% of Realtors reported a contact cancelation due to a rejected mortgage application, appraisal issues/inspections or employment loss.

"Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable — this speaks to an unfulfilled demand," Yun said.

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