Sales of previously owned homes rose to an 11-month high in December and the supply of properties on the market dropped to a near 7-year low, an

industry group said on Friday, pointing to a nascent recovery in the housing market.

The National Association of Realtors said existing home sales increased 5 percent month over month to an annual rate of 4.61 million units. November's sales pace was revised down to a 4.39 million-unit pace, previously reported as a 4.42 million-unit rate.

Economists polled by Reuters had expected sales to rise to a 4.65 million-unit sales pace. Sales in December were up 3.6 percent from a year ago. A total of 4.26 million homes were sold in 2011, up 1.7 percent from the prior year.

The third straight month of gains in sales added to hopes that a tentative recovery in the housing market was starting take shape, but progress will be painfully slow given a glut of unsold properties that is weighing down on prices.

(Reporting by Lucia Mutikani)