Purchases of existing houses, which are tabulated when a contract closes, increased 12% from November to a 5.28 million annual rate, figures from the National Association of Realtors showed Thursday. That's the most since May and exceeds the highest estimate of economists surveyed by Bloomberg News. The median price fell 1% from a year earlier, and the share of sales represented by foreclosures climbed.
Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable. At the same time, unemployment in excess of 9% and record foreclosures are among concerns that have prompted Federal Reserve policymakers to follow through with a second round of quantitative easing, which pushes down interest rates.
"Home sales are improving slowly but surely," says Aaron Smith, a senior economist at Moody's Analytics. "We really need to see job creation pick up to ensure housing continues to recover. Housing clearly is still a weak spot in the economy."
For all of last year, purchases decreased to 4.91 million, the fewest since 1997.
Existing home sales were forecast to rise to a 4.87 million rate in December, according to the median of 73 forecasts in a Bloomberg News survey. Estimates ranged from 4.5 million to 5.07 million after November's 4.68 million pace. The median price fell to $168,800 from $170,500 in December 2009.
The number of previously owned homes on the market dropped 4.2% to 3.56 million. At the current sales pace, it would take 8.1 months to sell those houses vs. 9.5 months at the end of November. Supply in the eight months to nine months range is consistent with stable home prices.
The average rate on a 30-year fixed mortgage was 4.74% this week, according to Freddie Mac. The rate reached 4.17% in early November, the lowest since records began in 1972.
The increase in rates "provided some urgency" to buyers, said Lawrence Yun, NAR's chief economist. But, he said, a sustained increase could hurt demand.