Data on existing home sales collected by the National Association of Realtors in September suggests that more Americans are coming into the housing market but that fewer of them are able to qualify for finance to buy a home.

The NAR reported that existing home sales, which are completed transactions that include single-family, town homes, condominiums and co-ops, dropped 3% to a seasonally adjusted annual rate of 4.91 million in September from an upwardly revised 5.06 million in August, but they still came in 11.3% above the 4.41 million unit pace in September 2010.

Existing-home sales have bounced around this year, staying relatively close to the current level in most months,” said Lawrence Yun, NAR chief economist. “The irony is affordability conditions have improved to historic highs and more creditworthy borrowers are trying to purchase homes, but the share of contract failures is double the level of September 2010. Even so, the volume of successful buyers is higher than a year ago and is remaining fairly stable – this speaks to an unfulfilled demand.”

The association reported that 18% of its members reported having contracts fail in September, unchanged from August but double what they were in September 2010. The association defines contract failures as cancellations caused by declined mortgage applications, failures in loan underwriting from appraised values coming in below the negotiated price, or other problems including home inspections and employment losses.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., blamed the difficulty borrowers have in qualifying for part of the problem.

“All year we've been discussing the fact that many creditworthy home buyers are being denied mortgages,” he said. “On top of that, loan limits have been lowered, which means buyers of higher-priced homes, including many in more expensive housing markets, now have to pay a higher interest rate for a jumbo mortgage than buyers who can qualify for a conventional loan. We need to remove the roadblocks to a housing recovery – not place more obstacles in the way of financially qualified buyers.”

As in previous months, purchases paid for entirely in cash and without financing accounted for 30% of purchase activity in September, up from 29% in August and 29% also in September 2010; investors make up the bulk of cash purchases, the association said.

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