The National Association of Realtors reported that the sales of existing homes increased in September, but prices dropped by 9% from the same period last year. The rise was the largest amount in more than five years in September.

In the report, the NAR stated that the sales of existing homes increased in September by 5.5 percent from August to September to a seasonally adjusted annual rate of 5.18 million units from August reading of 4.91 million units. This is the largest month-to-month increase since July 2003.

But even with the improvement in sales figures, prices declines are prevalent. The median sales price has dropped 9 percent compared to the figures a year earlier to $191,600.

Though the figures have improved, the worst is still to come as many analysts predict. Evidence of consumer confidence going down, unemployment rising and a recession being felt hinder the recovery of housing market.

Also, the September sales covers the contracts signed in July or August where the credit has not included the tightened credit terms. Sales for October and November may show the effects of the credit freeze.

Compared to a year before, September 2007 sales were characterized by a sudden dip in sales as a result of the then emerging credit problems.  Experts mentioned that the sales of foreclosed properties also contributed to the increase in sales.

"Compared to a fairly small share of foreclosures or short sales a year ago, distressed sales are currently 35% to 40% of transactions," said Lawrence Yun, NAR’s chief economist. "These are pulling the median price down because many are being sold at discounted prices."

The report also showed some positive regarding inventory as the excess supply of homes on the market fell in September. Realtors estimated the inventory went down to a 9.9 month supply from a 10.6-month supply in August. There are now only 4.3 million homes available for sale.

But that number could rise back above 11 months if sales begin to sink again and foreclosures continue to escalate.

So it's more likely that the worst is yet to come.