JANUARY 20, 2011.

Sales of Existing Homes Perk Up

Bargains and Low Interest Rates Fuel December Gain of 12.3%; Market Remains Far From Recovery.

By S. MITRA KALITA

The market for existing homes perked up in December as buyers snapped up bargains and rushed to lock in historic low interest rates, according to data released Thursday by the National Association of Realtors.

Sales of previously owned homes rose 12.3% from November, hitting a seven-month high. That was hardly enough, though, to salvage an otherwise weak year.

Sales volume in 2010, at 4.9 million, was the lowest since 1997, according to preliminary data from the trade group. Final year-end tallies will be released next month.

Economists were cautious in their assessment of the report, saying the housing market remains far from recovery. December's rebound set an annualized pace of 5.28 million—far below the 2005 peak of nearly 7.1 million existing homes sold.

"It's still very weak historically," said David Berson, chief economist of the PMI Group. "A 5.28 million pace is not strong. It shows the impact of only modest economic growth and only modest increases in households."

Sales of distressed homes, which include foreclosures and short sales, rose to a 36% market share in December from 33% in November. That spurred more discounting, with prices falling 1% in December.

For 2010 as a whole, median prices rose 0.3%. But single-family homes in locations such as Phoenix, Atlanta and Miami experienced double-digit price declines over the year.

Some house hunters say the bargains drove them to finally act. "We saw 2010 being a low point and an opportunity to make a very good purchase," said Joshua Dempsey, who bought a three-bedroom home in April with his wife in Napa Valley, Calif.

Mr. Dempsey also works as the director of real estate at Calistoga Ranch, Calif., a resort with both a five-star hotel and vacation properties. The latter are half sold now, a sign of "renewed confidence in the marketplace and a willingness for buyers to move forward," he said.

Rising interest rates also are having an effect on the marketplace, said David Blitzer, the chairman and managing director of the Standard & Poor's Index Committee. Average rates on 30-year, fixed-rate mortgages have begun to inch upward from a 60-year bottom reached in October, though rates still remain very low. Freddie Mac said Thursday that the average rate for a 30-year fixed loan was 4.74%, up from 4.71% last week.

"A lot of people who had gotten commitments, but hadn't locked in rates, looked at the numbers and decided they had to lock in the mortgage and close the purchase," said Mr. Blitzer. "That also gave the market a little bit of pop."

In NAR's assessment, December's existing-home sales data portends well for 2011, and the all-important spring market. "The market is getting much closer to an adequate, sustainable level," said NAR chief economist Lawrence Yun. "The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership, while exceptional affordability conditions remain."

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