Is Housing Headed Out of the Deep Freeze?

Encouraging December sales numbers signal demand could be returning to the housing market.

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The housing market seems to be taking its cues from the unseasonably warm winter, posting sales numbers that look more like a budding spring season than the barren chill of winter.

Existing home sales jumped 5 percent in December, according to the National Association of Realtors, the second highest pace of the year and the third month in a row sales have increased. Existing-home sales increased almost 2 percent overall in 2011, the report said.

Is the housing market finally ready to thaw out after being in a long, deep freeze?

The picture remains murky, primarily because contract cancellations due to declined mortgage applications and appraisal values coming in lower than the negotiated sale price continue to keep the lid on actual closings. A third of NAR members reported contract failures, up from 9 percent a year ago.

[See a collection of political cartoons on the economy.]

"People want to buy homes, but too often the process makes it too difficult if not impossible to do that," Joel Naroff, president and chief economist at Naroff Economic Advisors, said in a note to clients. "If you cannot get an appraisal that matches the contract price, mortgages cannot be written."

Since most prospective home buyers don't have tens of thousands of dollars lying around to pay for a home in cash, that means more sales have fallen through.

Still, December's report was solid and experts have high hopes for the housing market in 2012, especially if job creation keeps up the pace it has over the past few months.

"We have a large pent-up demand, and household formation is likely to return to normal as the job market steadily improves," NAR President Moe Veissi said in a release. "More buyers coming into the market mean additional benefits for the overall economy. When people buy homes, they stimulate a lot of related goods and services."

Twitter: @mmhandley

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