Home Sales Up In Sept. But More Troubles Ahead.

ALAN ZIBEL, AP Real Estate Writer

WASHINGTON -- Sales of previously occupied homes rose last month after the worst summer for the housing market in more than a decade. And the industry fears lawsuits over flawed foreclosure documents could keep buyers on the sidelines in the final months of the year.

Sales grew 10 percent in September to a seasonally adjusted annual rate of 4.53 million, the National Association of Realtors said Monday.

Home sales have declined 37.5 percent from their peak annual rate of 7.25 million in September 2005. They have risen from July's rate of 3.84 million, which was the lowest in 15 years.

Most experts expect roughly 5 million homes to be sold through the entire year. That would be in line with last year's totals and just above sales for 2008, the worst since 1997.

Still, sales could fall further if potential lawsuits from former homeowners claiming that banks made errors when seizing their homes make consumers fearful of buying foreclosed properties.

"You're going to see uncertainty on the part of homebuyers," said Quinn Eddins, director of research at Radar Logic Inc., which tracks the housing market.

In a survey taken by the Realtors group this month, about 23 percent of the 2,000 agents surveyed said they have a client who is no longer interested in purchasing a foreclosed property due to the foreclosure-document mess.

Federal banking regulators and attorneys general in all 50 states are investigating whether mortgage companies forced people from their homes using flawed paperwork.

Mortgage applications to purchase homes last week were 29 percent below the same week a year ago, according to the Mortgage Bankers Association. At that time, buyers were rushing to purchase homes to qualify for federal tax credits.

Last month the inventory of unsold homes on the market fell about 2 percent to 4 million. That's a 10.8 month supply at the current sales pace. It compares with a healthy level of about six months.

Sales grew last month across the country. They rose by 14.5 percent from a month earlier in the Midwest, nearly 11 percent in the South, 10 percent in the Northeast and 5 percent in the West.

The median sale price was $171,700, down 2.4 percent from the same month year ago.