US house sales unexpectedly jumped last month as rising foreclosures drove down prices and spurred buyers into their highest level of activity in more than a year.

The sale of existing, as opposed to new, homes rose by 5.5 per cent to an annualised rate of 5.18 million in September on the previous month as the average price dived by 5.6 per cent to $191,600 — the lowest level since April 2004.

Resales had been forecast to rise slightly to a 4.95 million annual rate, from 4.91 million in August.

The average US house price fell by 9 per cent in the year to October, the National Association of Realtors (NAR) added.

Compared with the year earlier, home sales rose by 1.4 per cent, representing the first year-on-year increase since November 2005.

Lawrence Yun, NAR’s chief economist, described the sales increase as "a nice jump".

"In terms of sales, I think we have bottomed out. The first step to housing market stabilisation is rising home sales. Hopefully, this trend can continue," Mr Yun added.

"The sales turnaround, which began in California several months ago, is broadening now to Colorado, Kansas, Minnesota, Missouri and Rhode Island," he said.

The sale of foreclosed homes represented between 35 and 40 per cent of September’s total.

Single-family homes, as opposed to flats, saw sales rise by 6.2 per cent to an annual rate of 4.62 million in September. Flat and shared-house sales were unchanged at an annual rate of 560,000 units in September.

Sales rose in three regions, with the West recording a 16.8 per cent jump. The Midwest saw an increase of 4.4 per cent and the South saw a 2.2 per cent rise. In the Northeast, sales fell by 1.2 per cent.

Inventories of homes fell by 1.6 per cent to 4.27 million in September available for sale, or a 9.9-month supply at the current sales pace. There was a 10.6-month supply at the end of August, marking two successive monthly declines since inventories peaked in July.

Resales are a good gauge of the health of the overall housing market since they account for 90 per cent of home sales. New houses make up the remainder.

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