U.S. home resales jumped to their highest level in a year in September, the latest indication that the housing market recovery is gradually getting back on track.
The National Association of Realtors said on Tuesday existing home sales rose 2.4 percent to an annual rate of 5.17 million units, the strongest reading since September of last year.
Economists polled by Reuters had forecast sales rising to a 5.10 million unit pace last month from August's 5.05 million unit pace. Sales, however, were down 1.7 percent compared to September of last year.
Data last week showed a rebound in home building in September. Housing is slowly regaining its footing after activity stalled in the second half of 2013 in the aftermath of a run-up in mortgage rates.
U.S. stocks were trading higher, with the PHLX housing sector index .HGX up more than 1 percent. Prices for U.S. Treasury debt fell, while the dollar rose against a basket of currencies.
The housing sector, however, continues to be hobbled by sluggish wage growth, which has lagged an acceleration in house prices. That has sidelined first-time buyers, a critical component for a sustainable housing market recovery.
Much of the recovery has been driven by investors who have been buying distressed properties and converting them into rental units. But investors are withdrawing from the market and accounted for only 14 percent of transactions last month.
That compared to 19 percent in September of last year.
"The overall momentum in the housing market recovery remains relatively weak. That said, with buying conditions still conducive and the labor market recovery continuing to progress, the outlook for the housing sector remains favorable," said Millan Mulraine, deputy chief economist at TD Securities in New York.
While investors' retreat from the market means fewer bidding wars and increased opportunities for ordinary buyers, first-time buyers are yet to step up. They accounted for 29 percent of sales for a third straight month.
That share remains below the 40 percent to 45 percent that is considered ideal by economists and real estate agents.
Last month, the inventory of unsold homes on the market increased 6 percent from a year ago to 2.30 million. At September's sales pace, it would take 5.3 months to clear houses from the market, down from 5.5. months in August.
A six months' supply is viewed as a healthy balance between supply and demand.
With supply improving, house price gains continue to moderate. The median home price of $209,700 last month represented a 5.6 percent increase from a year ago but a drop from the double-digit growth seen for much of 2013.
All-cash sales made up 24 percent of transactions in September, down from 33 percent in September of last year. Distressed properties - foreclosures and short-sales - accounted for 10 percent of sales, up from 8 percent in August.
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