Sales of existing homes rose in September by the most on record, a sign that cheaper borrowing costs are helping to stabilize an industry battling the headwinds of foreclosures and joblessness.
Home purchases increased 10%, to a 4.53 million annual rate, from 4.12 million in August, the National Association of Realtors said Monday in Washington.
Economists had forecast that sales would rise to a 4.3 million pace, according to the median projection in a Bloomberg News survey.
Still, the median home price fell 2.4% from a year earlier.
The lowest mortgage rates on record and cheaper homes are enticing some buyers and providing a backstop for the mortgage industry that precipitated the worst recession since the 1930s.
At the same time, the housing recovery will be slowed by unemployment forecast to exceed 9% through 2011 and foreclosures that add to the inventory of unsold homes.
Sales of existing houses are lower than the 4.83 million average pace set during recession that ended in June 2009, and are well off the record 7.25 million peak reached in September 2005.
"Even with this improvement, you're still at a remarkably depressed level," said Tom Porcelli, senior economist at RBC Capital Markets Corp. in New York. "We're going to continue to muddle along here, given the supply-demand imbalance."
Estimates of the 72 economists surveyed by Bloomberg ranged from 4 million to 4.8 million. In July, sales ran at a 3.84 million annual rate, the weakest in a decade's worth of record-keeping by the Realtor group.
Compared with a year earlier, sales of existing homes were down 19% before adjusting for seasonal patterns.
Sales rose in all four regions, the report showed, led by a 14.5% jump in the Midwest.
The median price fell 2.4% from September 2009, to $171,700.
Purchases of single-family homes rose 10%, to a 3.97 million annual rate.
The number of previously owned homes on the market fell 1.9%, to 4.04 million.
At the current sales pace it would take 10.7 months to sell those houses, compared with 12 months in August.
The monthly supply would need to drop to between eight and nine months for home prices to stabilize, according to the Realtor trade group.
Distressed sales, which include foreclosures and short sales in which the bank agrees to take less than the full amount of the mortgage, accounted for 35% of total sales.
A government tax credit of up to $8,000 gave housing a temporary lift through June.
But home purchases plunged in July, a month after buyers were originally required to close deals in order to qualify for the tax incentive.
Foreclosure moratoriums at JPMorgan Chase & Co. and other banks, along with government investigations into faulty paperwork, threaten to further delay a recovery as houses slated for repossession take longer to come to market.
Foreclosures are mounting as out-of-work Americans cannot meet monthly payments while growing numbers of homeowners, seeing their home prices slide to less than their mortgage values, also default.
The Federal Reserve and other regulators are "intensively" examining financial companies' home foreclosure practices and expect preliminary findings next month, Fed Chairman Ben Bernanke said Monday at a housing conference in Arlington, Va.
"More than 20% of borrowers owe more than their home is worth, and an additional 33% have equity cushions of 10% or less, putting them at risk should house prices decline much further," Bernanke said. "With housing markets still weak, high levels of mortgage distress may well persist for some time to come."
Unemployment forecast to exceed 9% through 2011 is another reason any recovery in housing may take years, even with 30-year mortgage rates near record lows.
Fed officials have signaled they may start another round of unconventional monetary easing at their next meeting, Nov. 3. Most economists, including the Nobel laureate Joseph Stiglitz and Goldman Sachs Group Inc. chief U.S. economist Jan Hatzius, say the measures will have little impact on economic growth.
Housing markets were "weak," with "sluggish or declining" sales in many regions, the Fed said last week in its survey of regional districts for September and early October.