Consumer Confidence, Home Sales Rise

He said that one-fourth of the country, the formerly hottest markets in such areas as California and Florida, will see prices decline further while the other three-fourths of the country will see sales and prices keep rising.

Other economists cautioned that while they believe housing has hit bottom, it could be a prolonged period of weakness that will last for much of next year, given the size of inventories that must be reduced.

"A lot of people who had been sitting on the sidelines are beginning to move back into a buying mode, but we don't look for things to turn up significantly until next summer," said Nariman Behravesh, chief economist at Global Insight.

The backlog of unsold existing homes dropped 1 percent in November to 3.82 million units, which represented a 7.3-month supply at the current sales pace.

The rise in the consumer confidence readings was a good sign that the housing slowdown was not more seriously affecting consumers' willingness to spend money, analysts said.

The fear had been that the severe slump in housing would cause people to stop spending and possibly contribute to an outright recession, much as the bursting of the stock market bubble in 2000 helped trigger the 2001 downturn.

"The latest data show us that the economic expansion remains firmly intact at year's end," said Mark Zandi, chief economist at Moody's Economy.com. "Consumers have jobs, gasoline prices are down and the stock market is up so people feel good."

But some analysts cautioned that it would take more increases in consumer confidence to be sure that the economy is on a sound footing.

"Given the seesaw pattern in recent months, it is too soon to tell if this boost in confidence is a genuine signal that better times are ahead," said Lynn Franco, director of the Conference Board's consumer research center.

There was good news on jobs Thursday as the Labor Department reported that the number of laid off workers filing applications for unemployment benefits rose by only 1,000 last week to 317,000. That's a level that analysts said indicated the job market was remaining strong in spite of the slowdown in overall economic growth.

By region of the country, sales of existing homes were down 1.6 percent in the South and unchanged in the Midwest while sales shot up by a strong 6 percent in the Northeast and were up 0.8 percent in the West.

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On the Net:

Existing home sales: http://www.realtors.org

Consumer confidence: http://www.conference-board.org