Existing-home sales lost steam in September, dropping 1.7% for the month to a seasonally adjusted annual rate of 4.75 million units, according to data released today by the National Association of Realtors (NAR). The drop stemmed from the single-family sector, which declined 1.9% on a monthly basis, while condo/co-op sales remained flat. On a year-over-year basis, sales were up 11.0%, an improvement over the previous month’s 8.0% annual gain.

However, the slowdown follows on the heels of August’s surge in existing-home sales. In a statement discussing the numbers, Lawrence Yun, chief economist at NAR, chalked September’s decline up to "occasional month-to-month setbacks," in spite of which "we’re experiencing a genuine recovery."

"More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest," he said. "Rather, inventory shortages are limiting sales, notably in parts of the West."

Indeed, the number of existing homes for sale stood at a seven-year low in September, and months’ supply—at 5.9 months—was the lowest seen since March 2006.

"Given that tight existing-home inventory is governing resale transaction volume, we view this as a positive for the home builders," wrote Stephen East, senior managing director at ISI Homebuilding Research, in a statement discussing the numbers today. "With single-family inventory dropping on both an absolute and months’ supply basis, we expect the turnaround in builder equity performance today may have staying power (all else equal)."

Also, the Mortgage Bankers Association’s measure of home purchase applications was trending up in August, making it likely that part of the dip in September’s sales was due to some would-be buyers’ inability to secure financing.

Prices fell on a monthly basis, with a 1.9% decline in the national median home price, although year-over-year the median price was up 11.3%, a stronger annual gain than August’s 8.0% increase. September also marked the seventh consecutive month of annual price gains, the first time existing-home sales have seen such a long gaining streak on an annual basis since late 2005 to 2006.

While improving prices are undoubtedly good news for the real estate industry, East expects that "positive pricing trends will draw ‘natural’ sellers to list their homes as we move into the spring selling season."

See NAR’s full report on September’s existing-home sales.

Claire Easley is a senior editor at Builder.