September market watch. (National Numbers)

TORONTO Oct 15 (Reuters) - Sales of existing homes in Canada rose in September from August, edging up for a second straight month, the Canadian Real Estate Association said on Friday. The industry group said a total of 33,913 homes changed hands in September, up 3 percent from August, and the highest level since May. Compared with a year earlier, however, sales were down 20.1 percent.

Seasonally adjusted sales were higher in two-thirds of the markets tracked by the association, led by Winnipeg, Calgary, and Montreal.

Analysts say the Canadian housing market is stabilizing as it cools off after helping to drive the economy out of recession last year and early this year.

Most big Canadian banks lowered their five-year fixed rate mortgages this week by 0.10 percent to 5.29 percent, a move that may continue to attract homebuyers.

"This, together with recent developments in existing home sales activity, signal the likelihood that we are closer to a balanced market position than previously envisaged," said TD Bank economist Shahrzad Mobasher Fard. "Some firming up in existing home sales and prices may consequently be in sight."

Risks include a slowing economy and rising household indebtedness, the economist noted.

The national average price dipped 0.2 percent in August from a year earlier to C$331,089 from C$331,683. It was the second straight month that prices were about even with levels in 2009.

The number of new listings rose 0.7 percent from the previous month, and remain 15 percent below the peak reached in April.

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