Home sales pick up in December

Sales of U.S. previously owned homes jumped more than forecast in December as buyers tried to lock in low mortgage rates before the economic recovery pushed borrowing up further.

Purchases of existing houses, which are tabulated when a contract closes, increased 12 percent to a 5.28 million annual rate, the most since May and exceeding the highest estimate of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed Thursday.

The median price dropped 1 percent from a year earlier, and the share of sales represented by foreclosures climbed.

Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable.

At the same time, unemployment in excess of 9 percent and record foreclosures are among concerns that have prompted Federal Reserve policymakers to follow through with a second round of quantitative easing.

"Home sales are improving slowly, but surely," said Aaron Smith, a senior economist at Moody's Analytics Inc. "We really need to see job creation pick up to ensure housing continues to recover. Housing clearly is still a weak spot in the economy."

For all of last year, purchases decreased to 4.91 million, the fewest since 1997.

Also Thursday, MDA DataQuick reported that Bay Area home prices fell 1.3 percent in December as foreclosure sales made up a larger share of purchases.

The median paid for new and resale houses and condominiums in the nine-county region was $375,000, down from $380,000 for both November and a year earlier, the San Diego real estate data firm said. Foreclosure sales increased for the fifth straight month to 31 percent of all purchases, the largest proportion since March.

"Most of what we're seeing are distress sales and bargain hunting, with a smattering of discretionary buying," John Walsh, MDA DataQuick's president, said in the statement. "While the dicey economy and employment concerns are major factors, tight mortgage credit is also a big issue right now, especially for the upper half of the market."

A total of 7,178 homes sold in the Bay Area last month, up almost 18 percent from November and down 8.3 percent from a year earlier, the company said.

This article appeared on page D - 3 of the San Francisco Chronicle