Sales of existing homes rose 10% sequentially in September to a seasonally adjusted annual rate of 4.53 million units, but were down 19% compared to the same month a year ago, according to figures compiled by the National Association of Realtors (NAR).

The trade group reported that although sales are headed in the right direction, prices are not. The national median existing-home price fell to $171,700 in September, a 2.4% decline from the same month last year.

Also, distressed home sales accounted for 35% of all sales activity during the month, a slight increase from August, but a 20% jump from a year ago.

NAR said first-time buyers purchased 32% of homes in September, almost unchanged from August.

Lawrence Yun, NAR's chief economist maintains that the nation's housing market is in the early stages of recovery. "A housing recovery is taking place but will be choppy at times depending on the duration and impact of a foreclosure moratorium," he said. "But the overall direction should be a gradual rising trend in home sales with buyers responding to historically low mortgage interest rates and very favorable affordability conditions."

Available housing inventory fell 1.9% to 4.04 million units at the end of September, which represents a 10.7-month supply of product at the current sales pace. In August the supply figure was at 12 months.

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