The National Association of Realtors said Friday that sales dipped 1.7 per cent to a seasonally adjusted annual rate of 4.75 million. That's down from a rate of 4.83 million in August, which was the highest in more than two years.
Sales are still up 11 per cent from a year earlier. They remain below the more than 5.5 million that economists consider consistent with a healthy market.
The inventory of homes for sale fell in September to 2.32 million. It would take 5.9 months to exhaust the supply at the current sales pace, the lowest sales-to-inventory ratio since March 2006.
The housing market is slowly recovering after a six-year slump. Sales have improved from last year, helped by record-low mortgage rates and more stable home prices. The low supply of homes has also made some markets more competitive, which helps boost prices. Foreclosures are down, too, which also helps lift prices.
The market is still being constrained by tougher lending standards. Many would-be buyers, particularly first-time buyers, are having difficulty qualifying for a mortgage or can't afford the larger down payments that many lenders want.
A low supply of previously occupied homes has also given a boost to the new-home market.
Builders broke ground on homes and apartments at the fastest pace in more than four years last month. The jump could help boost the economy and hiring. Still, the pace of construction is roughly half of what is associated with a healthy market, and new-home sales are coming off depressed levels.
Builders are more confident because they are seeing more prospective buyers visit properties. The National Association of Home Builders/Wells Fargo builder sentiment index, released Tuesday, inched up to its highest level in more than six years in October.
There are also signs that the economy is improving. Retail sales rose at a solid pace in September, reflecting growing confidence among consumers. A measure of consumer confidence released last week reached a five-year high.
A recent report from data provider CoreLogic showed that the so-called "shadow" inventory of homes fell 10 per cent in July compared with a year ago. The shadow inventory consists of homes in foreclosure or with seriously delinquent mortgages.