Existing home sales rise sharply in December

The December sales pace is the volume that the NAR is expecting to see throughout 2011, Yun said.

"The market is getting much closer to an adequate, sustainable level," he said. "The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain."

The housing market was plagued by 1 million foreclosures last year. Housing analysts have predicted a rise of 20 percent in 2011, with prices expected to bottom out this year as the sector makes a slow comeback. 

Still, most housing experts have said the sector is at least two years away from a healthy, sustained recovery. 

On Wednesday, Sheila Bair, head of the FDIC, called for a "foreclosure claims commission" to handle complaints from homeowners who say they have lost their homes through errors made by their mortgage companies. The commission, she said, could distribute claims to affected borrowers like the one set up to handle those affected by the Gulf oil spill, that would be paid for by the mortgage industry.

"We need to provide remedies for borrowers harmed by past practices," Bair said at a Mortgage Bankers Association conference. 

She is pushing for a wide range of changes throughout the mortgage industry and said it's time for the industry and the government to "bring closure to the crisis."

“The fact is, every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them — and the rest of us — even more,” she said. 

Prices are still lagging behind last year's levels, with the median price for a previously owned home of all types at $168,800 in December, 1.0 percent below December 2009. 

Distressed homes made up 36 percent of the market share, up from 33 percent in November and 32 percent in December 2009.

“The modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues,” Yun said.

Total housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November, the report said. 

Buyers are responding to historically low mortgage rates and dropping prices, although credit is still tight. 

Although foreclosures are expected to pick up this year, homes loans in the past two years are showing low default rates, which will help the housing market regain its footing, said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.

The rate on a 30-year fixed-rate mortgage rose to 4.71 percent in December from 4.30 percent in November compared with a rate of 4.93 percent in December 2009, according to the most recent figures released by Freddie Mac. 

Single-family home sales jumped 11.8 percent but are 2.5 percent below the 4.76 million level in December 2009, according to the NAR.

Existing condominium and co-op sales surged 16.4 percent, still 5.2 percent below the pace a year ago.

Regionally, existing-home sales in the Northeast jumped 13.0 percent, and they rose 11 percent in the Midwest. In the South, existing-home sales increased 10.1 percent, 2.5 percent below December 2009. 

Existing-home sales in the West surged 16.7 percent but remain 1.5 percent below December 2009.