US home sales rebounded in September despite tight supply

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The institutional investors who bought up homes in recent years have continued to rent them out rather than putting them on the market. Moreover, homebuilders have not aggressively stepped up construction. The Commerce Department reported Wednesday that home construction fell 9 per cent in September to the slowest pace in 18 months.

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But buyers have been lured into the market by mortgage rates that remain near historic lows. Mortgage giant Freddie Mac said Thursday that the rate on a 30-year, fixed-rate mortgage rose to 3.52 per cent, still close to the record low 3.31 per cent from November 2012.

The association said first-time home buyers accounted for 34 per cent of the purchases, the most since July 2012. On Tuesday, the real estate firm Zillow released a report showing a surprise increase in first-time home buyers over the past year — good news for the housing market because home ownership rates for adults under 34 have been at record lows.

Jennifer Lee, senior economist at BMO Capital Markets, notes that first-timers account for 40 per cent to 45 per cent of sales in a healthy market, “so more improvement is needed.”

The strong demand for homes combined with tight inventory suggests that would-be home owners could wind up in bidding wars when the home buying season heats up in the spring.

“What is lacking is inventory,” said the association’s chief economist, Lawrence Yun. “If we had more, we would sell more … Home builders need to ramp up construction.”

Paul Wiseman, The Associated Press