U.S. Existing-Home Sales Rebounded in September

Patrick T. Fallon/Bloomberg via Getty Images

WASHINGTON—A pickup in home sales last month signaled stabilization in the U.S. housing sector despite continued pressure from tight inventory and rising prices.

Sales of previously owned homes rose 3.2% from August to a seasonally adjusted annual rate of 5.47 million in September, the National Association of Realtors said Thursday.

That exceeded economists’ expectations for a more modest increase to a 5.35 million sales rate.

Existing-home sales, which account for the vast majority of U.S. homebuying activity, peaked in June at an annualized 5.57 million, the strongest monthly sales pace since February 2007. But sales softened over the next two months, and August’s revised sales pace of 5.30 million was the weakest in six months.

September’s rebound showed the summer slowdown was a “moderate decline and not a turning point,” said Lawrence Yun, the NAR’s chief economist.

Sales of previously owned homes in September were up 0.6% from a year earlier.

The housing market remains under pressure from tight inventory, which is denting affordability by pushing prices higher. At the latest sales pace, it would take 4.5 months to exhaust the supply of previously owned homes on the market, down from 4.8 months in September 2015. The median price of an existing home sold in September was $234,200, up 5.6% on the year.

”We are entering a seasonal slowdown … as we enter the winter months, but once the spring buying season returns, it’s going to be quite heated” due to lack of supply, Mr. Yun said.

More broadly, Thursday’s report offered signs of improving health in the housing market. First-time home buyers accounted for 34% of September sales, up from 31% in August and matching the highest level since July 2012. At the same time, foreclosures and short sales are in retreat—just 4% of September purchases were so-called distressed sales, edging down from 5% the prior month.

”Underlying demand for housing remains strong—driven by solid job gains, accelerating wages, rising household formations and near record-low mortgage rates,” said David Berson, chief economist at Nationwide Insurance. “All despite significant supply constraints.”

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.

The U.S. housing market’s prolonged recovery following the 2007-09 recession was a solid contributor to overall economic growth in recent years. But a pullback in residential investment during the second quarter, following eight consecutive quarters of growth, acted as a drag on the broader economy.

Weak existing-home sales for the third quarter as a whole suggest residential investment will again weigh on gross domestic product growth, J.P. Morgan Chase economist Daniel Silver said in a note to clients. The Commerce Department will release its first official estimate for third-quarter GDP next week.

Federal Reserve officials last month judged that “the sluggishness in the housing sector appeared to have continued into the third quarter,” according to minutes of the Fed’s Sept. 20-21 policy meeting that were released last week.

Recent data have suggested weakness in construction of apartment buildings and other multifamily structures, balanced by rising investment in single-family housing. Permits issued for buildings with five or more residential units were down 11.6% in the first nine months of 2016 versus a year earlier, while permits for new single-family homes were up 8.1% over the same period, the Commerce Department said Wednesday.

Sales of newly built single-family homes, which account for a small slice of the overall market, rose 13.3% in the first eight months of the year compared with the same period in 2015, according to the agency.

Borrowing costs remain low for prospective home buyers who qualify for loans. The average interest rate on a 30-year fixed-rate mortgage in September was 3.46%, up slightly from 3.44% the prior two months but well below the September 2015 average of 3.89%, according to Freddie Mac.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com and Jeffrey Sparshott at jeffrey.sparshott@wsj.com.

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