House sales going up, but it's going to be a bumpy ride

WASHINGTON - 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.

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.

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 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.

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.

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 to dip again in the winter months because the rising unemployment rate is forcing more homeowners into foreclosure.