WRAPUP 3-U.S. existing home sales rise, supply edges down

* Existing home sales rise 10 percent in September

* Supply of homes slips to 10.7 months

* Median home price falls 2.4 percent from year-ago
(Updates markets to close)

By Lucia Mutikani

WASHINGTON, Oct 25 (BestGrowthStock) – Sales of previously owned
U.S. homes rose a greater-than-expected 10 percent in September
but remained at depressed levels that point to a painful and
protracted recovery for the housing market.

The rise took sales to an annual rate of 4.53 million
units, the National Association of Realtors said on Monday. It
was the second monthly gain and far outstripped economists’
expectations for an increase to a 4.30 million-unit pace.

Still, the data did little to weaken the case for further
monetary easing from the Federal Reserve, with sales far below
the 5 million-unit pace usually associated with a healthy
market.

“This is relatively goods news but the housing market
situation has a long way to go before it fully recovers,” said
Chris Christopher, a senior economist at IHS Global Insight in
Lexington, Massachusetts.
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U.S. existing home sales graphic: http://r.reuters.com/nux99p
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The report had little impact on U.S. financial markets as
investors continued to look ahead to the Nov. 2-3 Fed meeting
at which officials are expected to decide to inject more money
into the economy through bond purchases to drive borrowing
costs lower and stimulate demand.

Expectations of further Fed easing pushed the U.S. dollar
to a fresh 15-year low against the yen and weakened it against
most major currencies. Stocks on Wall Street rose to a 5-1/2
month high as traders anticipated a looser monetary policy and
piled into riskier assets.

Prices of U.S. government debt drifted mostly lower as
traders booked profits from a rally early in the session.

STABILITY AT LOW LEVELS

The Fed cut overnight interest rates to near zero in
December 2008 and has already bought about $1.7 trillion worth
of Treasury and mortgage-related debt. That helped push
mortgage rates to historic low levels.

The housing market is showing signs of having bottomed
after hefty declines in the aftermath of the end of a popular
tax credit for home buyers earlier this year.

Activity, however, remains very subdued and the recovery is
expected to be very slow given the 9.6 percent U.S.
unemployment rate. A cloud of uncertainty from investigations
into the processing of foreclosures by some banks looms over
the sector, which was at the heart of the 2007-2009 recession.

Last month, foreclosed properties accounted for 23 percent
of sales while short sales made up 12 percent. The combined
percentage was up slightly from August. First-time buyers
accounted for 32 percent of transactions in September.

There are concerns the foreclosure investigation could slow
the housing market correction as banks hold back on sales.
According to the NAR, foreclosed properties constitute about 20
percent of homes on the market.

The industry group said a survey of its members taken two
weeks ago showed buyers were becoming hesitant to snap up
foreclosed properties, worried they might not be dealing with
the lawful owner.

Sales of single-family homes and condominiums both rose,
the report showed. A 1.9 percent fall in the supply of houses
available for sale to 4.04 million units also offered a sign of
increased stability in the market.

Still, the inventory — a 10.7 months’ supply — remained
high and economists believe sales will level off soon, citing a
recent drop in applications for loans to buy homes. They fear
the supply overhang will continue to weigh on prices.

“Together with additional supply from ‘shadow inventories’
such as foreclosures and looming delinquencies, it means that
housing prices will likely remain under pressure and continue
trending lower throughout this year and next,” said Yelena
Shulyatyeva, an economist at BNP Paribas in New York.

The national median home price fell 2.4 percent last month
from September of last year to $171,700.
(Editing by Neil Stempleman and Dan Grebler)

WRAPUP 3-U.S. existing home sales rise, supply edges down