Housing data points to rocky rebound

Sales of new homes rose more than 6 percent in October. But that was only because of strong results in the South.

Home prices rose in 11 major metro areas in September, but fell in nine. Home resales, meanwhile, were up nationwide, with the biggest gain in the Midwest.

Taken together, the data show that the housing market's recovery is still in its infancy and likely to be bumpy.

"We're muddling along the bottom of the housing cycle," said John Burns, a California-based real estate consultant.

That mirrors the broader economy, which is emerging from the longest recession since the Great Depression. Reports Wednesday showed a decline in new jobless claims and an increase in consumer spending, while orders for costly manufactured goods fell unexpectedly.

If the upward trend in housing continues, it would give the economic recovery more fuel. Spending on homebuilding and remodeling were an economic driver in the July-September quarter for the first time in nearly four years.

During the housing bust, the building industry scaled back on construction to thin the glut of homes on the market. There were 239,000 new homes for sale at the end of October, the lowest inventory level in nearly four decades. At the current sales pace, that's a 6.7 months of supply, down from last winter's peak of more than a year, and a sign that builders may soon ramp up construction.

"If you're looking for a sign that builders will need to start swinging their hammers again soon, this is it," wrote Mike Larson, real estate analyst at Weiss Research.

New home sales were up more than 5 percent from a year ago, the first yearly increase since November 2005. Sales are now up 31 percent from the bottom in January, but down 69 percent from their peak in July 2005.

Sales at John Wieland Homes and Neighborhoods were up by half last month compared with a year earlier. The company builds homes in the Carolinas, Georgia and Tennessee.

"There's a lot of people on the prowl," said company founder and CEO John Wieland. "It's incredible how much has changed in a year."

Both the economy and the housing market are being propped up with unprecedented government intervention. The Obama administration is trying to limit the supply of foreclosures with a mortgage relief program, while attracting more buyers with tax incentives. The Federal Reserve, meanwhile, is keeping interest rates low.

The average interest rate for a 30-year fixed mortgage was 4.78 percent this week, matching a record low set at the end of April, mortgage finance company Freddie Mac said Wednesday.

Low rates coupled with falling prices have restored affordability to large swaths of the country. And many economists expect prices will dip again in the winter months because the rising unemployment rate is forcing more homeowners into foreclosure.

Markets like Las Vegas and Seattle have already seen price declines for 12 straight months, while prices have risen for at least six consecutive months in Denver, Washington D.C. and Chicago, according to the Standard & Poor's/Case-Shiller index of 20 major cities released Tuesday.

Nationally, the median price of a new home was $212,200 in October, almost even with $213,200 a year earlier, but up almost 1 percent from September's level of $210,700, government data showed.

That helped propel new home sales to a seasonally adjusted annual rate of 430,000 from an upwardly revised 405,000 in September. The results came as a surprise. Economists surveyed by Thomson Reuters had expected a pace of 410,000.

The report tallies signed contracts to buy homes rather than completed sales. Most borrowers would have had to sign contracts earlier to meet the original Nov. 30 deadline for a tax credit for first-time buyers and expand it to some existing homeowners. The credit now covers contracts signed by April 30, and analysts expect it to further the housing recovery in the coming months.

The surge in sales was driven entirely by a 23 percent increase in the South. Tom Brown, a partner with custom home builder Crown Home Builders, S.C., said much of the sales activity in his market has been in the lower price ranges, from $125,000 to $180,000. Sales of homes $275,000 and above are still slow.

"Hopefully, when more good reports come out, people will have more confidence about buying," Brown said.

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AP Real Estate Writers Alex Veiga and Adrian Sainz contributed to this report from Los Angeles and Miami.