Existing home sales rise, prices fall

NEW YORK (CNNMoney.com) -- The price of a typical home sold in November continued to slide, according to a trade group report Thursday, and sales ramped up slightly in a sign of continued weakness as the battered real estate sector seems to begin stabilizing.

The National Association of Realtors reported that the median price of a home sold in November was $218,000, down 3.1 percent from the $225,000 in November 2005. The median is the point at which half the homes sell for more and half sell for less. The median price in November was down from $221,000 in October.

While month-to-month prices are somewhat volatile, year-over-year declines in home prices are relatively rare and are seen as a significant sign of weakness in the real estate market. Until it occurred in August, there hadn't been such a drop in 11 years.

The pace of home sales picked up in November, coming in at an annual rate of 6.28 million for the month. That's up 0.6 percent from the 6.24 million rate in October, and it beat the forecast of a 6.15 million rate from economists surveyed by Briefing.com. But the sales pace was 10.7 percent below year-ago levels of 7.03 million units.

Wachovia economist Phillip Neuhart sees the mild increase in sales as a firming in the foundation of the housing market.

"Now we're seeing a bit of leveling off," said Neuhart to CNNMoney.com, emphasizing that the upturn in sales should not be interpreted as recovery. "We are not going to reach too much into this report, but there is no question that the market has found some stability."

Neuhart expects the market to begin its recovery in 2007, aided by a slow-down in the growth of housing prices, as well as two projected rate cuts from the Federal Reserve in the first and second quarters.

Economists also said that the market could get a lift from a draw-down in inventory. The National Association of Realtors reported that total housing inventory levels fell 1.0 percent in November to 3.82 million existing homes available for sale.

"We've entered a more sustainable period of home sales now, and we expect greater support for prices over time as inventory levels are eventually drawn down," said David Lereah, chief economist for the National Association of Realtors, in a press release. Lereah also said he believed the housing market reached its low point in September.

But Jeoff Hall, chief U.S. economist for Thomson Financial, told CNNMoney.com that the market hasn't hit bottom yet.

"I do think we have reached some stability, but I wouldn't say we are destined to go higher," said Hall. "I don't think the bottom of the housing market will be realized until the first quarter of 2007. We still have an enormous supply of houses to sell."

Hall said housing prices have "a little bit more to bleed out before we get higher," but the sales rate will improve in the first quarter of 2007.

A separate report on new home sales Wednesday showed surprising strength in both the number of sales and prices for that key portion of the market. That helped lift the stocks of most of the home builders, who have been hurt by the downturn in real estate.

Still, in the last few months, Pulte Homes (Charts), Lennar (Charts), Centex (Charts) and Toll Brothers (Charts) have all given earnings guidance below consensus forecasts, and analysts are forecasting continued earnings declines at KB Home (Charts) and D.R. Horton (Charts).

New home sales: Back from the dead?

Fortune: Real estate hot spots and cold spots

Business 2.0: New rules for real estate

More on real estate and how it affects you and the economy