NEW YORK (CNNMoney) -- Homebuyers scooped up more previously owned homes in October, slowly putting a dent in the huge inventory on the market, an industry report showed Monday.
Sales of existing homes rose 1.4% last month to an annual rate of 4.97 million homes, up from a downwardly revised 4.90 million homes in September, the National Association of Realtors reported Monday.
That was higher than expected. Economists polled by Briefing.com had expected an annual rate of 4.85 million homes in October.
Compared to a year ago, the rate of existing home sales has jumped 13.5%, from 4.38 million units.
Continued gains in home sales have lightened up the inventory of homes on the market, the report showed. Total housing inventory at the end of October slipped 2.2% to 3.33 million existing homes for sale, representing an 8-month supply at the current sales pace. That's down from an 8.3-month supply in September, and continues an ongoing downward trend since hitting a record high of 4.58 million in July 2008.
Foreclosures and short sales dropped to 28% of sales in October, down from 30% in September.
Even as the stockpile of homes on the market eases, housing prices are continuing to dip. The median price for an existing home was $162,500 in October, 4.7% lower than a year ago.
That means it's still a great buying opportunity for house hunters. But one of the problems preventing the housing market from making a full recovery is that many of the homebuyers attempting to buy houses are seeing their mortgage applications rejected, said NAR chief economist Lawrence Yun.
Contract failures, which include declined mortgage applications or failures in loan underwriting because of problems including appraised values coming in below the negotiated price, jumped to 33% in October, up from 18% in September.
"Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales, such as job creation, rising rents and high affordability conditions," said Yun.
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