Home sales rose in November, adding to hints of recovery, but updated data showed the housing crash was much deeper than previously thought.
The National Association of Realtors said on Wednesday that sales of previously owned homes increased 4 percent from October to an annual rate of 4.42 million units.
At November's sales pace, the 2.58 million unsold homes on the market represented a 7.0 month's supply, the lowest since February 2007 and a sign the backlog of inventory that has been weighing on the market was clearing.
The rise in sales and drop in inventory was the latest suggestion the housing sector, which triggered the 2007-09 recession, may be on the cusp of a recovery. Data on Tuesday showed housing starts scaled a 1-1/2 year high in November.
The housing market is finding its bottom, and that will translate into more growth in GDP and less of a drag on consumer confidence, said Robert Dye, chief economist at Comerica in Dallas. But we still have a long, long way to go.
The pickup in sales, however, is coming off a deeper trough.
NAR said it had overstated sales from 2007 through 2010 by 14.3 percent. Sales over that period averaged 4.42 million units a year, not 5.16 million, and they bottomed at a 3.30 million-unit pace in July 2010, rather than 3.86 million, underscoring the depth of the downturn.
The group blamed double-counting of properties, builders selling homes through real estate brokers and geographic population shifts as among the reasons for its mismeasurement.
A housing recovery could help underpin what already appears to be a quickening of U.S. economic growth. During normal times, economists estimate that one out of every eight jobs in the economy is generated by housing-related activity.
Lawrence Yun, the chief economist for the Realtors' group, said existing home sales for 2011 were expected to total 4.25 million units, up from 4.19 million units last year.
While the U.S. economy appears to be gathering strength, the global backdrop remains troubling with much of the world slowing down and Europe sliding into an almost certain recession.
In addition, lawmakers have yet to break an impasse over extending a payroll tax cut for 160 million U.S. workers that expires at year end. Economists have warned a failure to keep the tax cut in place could hit the economy hard.
Stocks on Wall Street were little moved by the housing data as persistent worries over the European debt crisis dominated sentiment. U.S. stock indexes fell as weak results from technology giant Oracle Corp
U.S. government debt prices also fell, while the dollar was up against the euro.
Oracle pinned its disappointing results on the increased scrutiny its customers were applying to their investment spending, a potentially bearish sign for the economic outlook.
INVENTORY STILL BLOATED
While the inventory of unsold homes fell in November, market conditions are still troubled and analysts warned that a stream of foreclosed properties coming onto the market would likely keep prices under pressure.
The median sales price rose 2.1 percent from October, but was still down 3.5 percent from a year ago at $164,200.
Distressed properties, foreclosures and short sales which typically occur at deep discounts, accounted for 29 percent of sales last month, up from 28 percent in October.
The number of new foreclosures jumped by more than 21 percent in the third quarter as banks moved more aggressively after a pause that began late last year, a bank regulator said.
Last month, a third of pending existing home sales contracts were canceled, the NAR said. That was unchanged from October but way above the year-ago level of 9 percent, a suggestion that bank lending remains tight.
We expect months' supply to head higher as inventory enters the market, said Michelle Meyer, a senior economist at Bank of America Merrill Lynch. With a sluggish economic recovery, low consumer confidence and tight credit conditions, it will be difficult to clear the excess inventory.
There is still a bumpy road ahead for the housing market, she said.
(Additional reporting by David Clarke; Writing by Lucia Mutikani and Tim Ahmann; Editing by Neil Stempleman)