Home sales rose in December to the highest pace in nearly a year. The gain coincides with other signs that show the troubled housing market improved at the end of last year.

Still, sales remain depressed and ended 2011 well below healthy levels.

The National Association of Realtors said Friday that sales increased 5 percent last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase.

For the year, sales totaled only 4.26 million. While that’s up from 4.19 million the previous year, it’s below the 6 million that economists equate with healthy housing markets.

Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year.

The median sales price rose 2.3 percent to $164,500 in December.

Hiring has also improved, which is critical to a housing rebound. Applications for unemployment benefits are near a four-year low. The unemployment rate fell in December to its lowest level in nearly three years. And companies are coming off their best six-month stretch for hiring since 2006.

Still the housing market has a long way to go before it is fully recovered from the housing bust four years ago. In the last four years, home sales have slumped under the weight of foreclosures, tighter credit and falling price.

Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. Purchases by that group fell last month to make up only 31 percent of sales. That’s down from 35 percent in November. In healthy markets, first-time buyers make up at least 40 percent.

At the same time, homes at risk of foreclosure made up a third of all sales last month. In healthy markets, they comprise 10 percent of sales. Investors are increasingly buying homes priced under $100,000.

Still, Sales rose across the country in December. They increased on a seasonal basis by more than 10 percent in the Northeast, 8.3 percent in the Midwest, 2.9 percent in the South and 2.6 percent in the West.

The glut of unsold homes declined to 2.38 million homes. At last month’s sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.

By  Timothy R. Homan

Jan 6, 2012 8:34 AM ET

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by Kyle Colona on January 5, 2012

The Federal Reserve is sticking its toe into the bog of the housing finance sector and recommending more action by the federal government to bring the market out of its hibernation.

In what the Wall Street Journal calls an “unusual foray into housing policy,” the Fed released a report calling for more “aggressive action” from Congress and other policy makers to loosen lending standards and tapping into those dead dogs Fannie Mae and Freddie Mac to kick start a housing recovery.

But the Fed’s play seems rather bizarre given that many on the street believe that the behemoth housing GSEs contributed mightily to the mortgage meltdown by lowering underwriting standards in the years leading into the housing market meltdown.

In fact, the Fed paper said in part: “some actions that cause greater losses to be sustained by the companies in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.”

This sounds like the typical “constructive ambiguity” that Federal Reserve statements usually are wrapped in, whether or not on Three Kings Day or any other day. Was it not Einstein who said that insanity is doing the same thing over and over and expecting a different result?

But let me not digress.

In any event, the Journal is also reporting that the central bank has lowered short-term interest rates close to zero and rates will most likely remain there until the middle of next year – that is, well after the current presidential election is decided.

While the low rates have kept mortgage rates to their lowest recorded levels, borrowers have not been able to reap the rewards because they lack equity in their once over valued homes and related credit scores have become tarnished and incomes continue to shrivel as the laggard known as the US economy stumbles along.

And let’s not forget that Fannie and Freddie have been sitting in a government conservatorship at a cost to taxpayers of mover $150 billion and this is hindering the real estate market from recovering. Meanwhile in a related story the Huffington Post notes that the Federal Reserve also contends that that relying on foreclosures to clear the housing markets is “costly and inefficient” since this “can lead to deteriorating homes and weigh on the property values in the surrounding community.”

So the Fed paper also said that lenders should pursue loan modifications and servicers should offer “more incentives to seek alternatives to foreclosure.” But the Obama administration has already pursued policies aimed at encouraging lenders to modify loans with very limited success.

In fact, the “Home Affordable Modification Program”, which Obama announced in February 2009 has helped less than 700,000 borrowers as of October 2011, far fewer than is required to salvage the ravaged housing market where 3 to 4 million homeowners are in danger of losing their homes.

In the final analysis, the troubles in the real estate finance sector continue to be the key albatross around the neck of the US economy, an albatross that is sure to become part of the political rhetoric as we head further into the 2012 presidential election campaign.

Kyle Colona is a New York based freelance writer and a Feature Writer for the Compliance Exchange. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications.

National Association of Realtors

Washington, DC, December 29, 2011

Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 7.3 percent to 100.1 in November from an upwardly revised 93.3 in October and is 5.9 percent above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4 percent monthly gain.

The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit.

“November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun added.

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Washington, DC

December 21, 2011

According to Lawrence Yun, NAR chief economist, “Sales reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010 – a genuine sustained sales recovery appears to be developing,” he said. “We’ve seen healthy gains in contract activity, so it looks like more people are realizing the great opportunity that exists in today’s market for buyers with long-term plans.”

Total housing inventory at the end of November fell 5.8 percent to 2.58 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from a 7.7-month supply in October. “Since setting a record of 4.04 million in July 2007, inventories have trended down and supplies are moving close to price stabilization levels,” Yun said.