Wells Fargo Securities said the California housing market continues to struggle and is not yet ready to bolster California's economic rebound.

The October existing home sales for the state came in at 493,240 at an annualized rate. This was a 0.9 percent increase in existing home sales in October from September and a steady 8.5 percent existing home sales gain since October 2010.

The latest existing homes sales data are mildly positive, said Scott Anderson, an economist at Wells Fargo Securities.

Lower mortgage rates from a year ago have been somewhat helpful in supporting home sales, but there are headwinds even here as lower conforming loan limits for Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) appear to have had a cooling effect on home sales in October, especially higher cost regions of the state, such as San Francisco and southern coastal areas, said Anderson.

Anderson said there were other less encouraging trends as well. Median existing home price declines accelerated in October, falling 3.3 percent from September to $278,060.

Anderson said median existing home prices in California are now 8.9 percent lower than in October 2010 as lower conforming loan limits have affected sales activity in higher-priced properties. The unsold inventory of properties over $1 million in value is still at 10.7 months.

Inventories of properties between $750,000 and $1 million in value are unchanged from a year ago at 8.1 months. Average days on market also increased to 55.2 in October 2011 from 51.5 in October 2010.

Anderson said much of the sales action remains in foreclosed and distressed properties around the state. This has helped reduced the months of unsold inventories statewide to 5.3 months in October from 6.2 months in October 2010.

But, home inventories are stuck at much higher levels in higher-priced regions, such as Los Angeles, Napa, San Francisco, Sonoma, Orange County, Santa Barbara, Ventura and San Diego.

We believe that the California housing market is working through its problems, though progress remains at a glacial pace. A weaker economy in 2012 will only further slow the healing process. We expect the California housing market to remain moribund over the forecast horizon, said Anderson.