December housing sales surge nationally and gives housing industry hope for 2011

Among the causes for optimism:

• In December buyers snapped up existing homes at a seasonally adjusted annual rate of 5.28 million units, an increase of 12.8% from November and the strongest sales pace since last May, the National Association of Realtors said Thursday.

• Building permits for new single-family homes rose 5.5% last month, the third consecutive monthly increase and the strongest showing since March, the Commerce Department said Wednesday.

That sets the stage for more home construction later this year as the economy improves, says Celia Chen, economist at Moody's Analytics.

'The trend is up,' Chen says.

But it'll be a slow slog.

• For December, the inventory of unsold homes stood at an 8.1 months supply, the Realtors group says, down from 9.5 months supply in November. That represents the amount of time it would take to sell the remaining supply of homes on the market at the December sales pace. A normal inventory supply is six months.

• The Realtors group also says existing home sales last year dropped 4.8% to 4.91 million units, the lowest level in 13 years.

• The previous two years have been the worst on record for home builders in at least 50 years.

• Nationwide, home prices are down almost 30% from their 2006 peak.

The housing market recovery 'will be two baby steps forward and one backward,' says Joel Naroff, chief economist at Naroff Economic Advisors.

The key is job creation, says Lawrence Yun, chief economist with the National Association of Realtors. When more people are working, and earning higher incomes, home buying increases. IHS expects the economy to add 2.5 million jobs this year and 2.7 million next year.

'The (housing) market appears to have hit bottom, and now we're trying to get back to normal,' Yun says.

Even historically low mortgage rates have done little to boost the sales.

The average rate on a 30-year fixed mortgage rose to 4.74% this week from 4.71% the previous week, Freddie Mac said Thursday. The average rate on the 15-year loan, a popular refinance option, slipped to 4.05% from 4.08%.

The 30-year loan rate reached a 40-year low of 4.17% in November, and the 15-year mortgage rate fell to 3.57%, the lowest level on records dating back to 1991.

The median price for a home sold in December nationally was $168,800, down 1% from a year ago.