Home sales, confidence show strength

U.S. existing home sales rose in November for a second straight month and consumer confidence hit an eight-month high in December, according to reports Thursday that suggested the economy was ending the year on a solid note.

Other reports showed business activity expanded in the Midwest this month, suggesting the ailing factory sector could be finding its footing, while initial claims for state jobless benefits edged up slightly last week.

The National Assn. of Realtors said the pace of existing home sales rose 0.6% in November to a 6.28-million-unit annual rate, defying Wall Street forecasts for sales to ease slightly and providing the latest evidence that housing was stabilizing after a steep drop.

Separately, the Conference Board said its index of consumer sentiment climbed to 109 in December -- the highest since April -- from an upwardly revised 105.3 in November.

In addition, the National Assn. of Purchasing Management-Chicago said its gauge of Midwest business activity rose to 52.4 from 49.9 in November in a sign that activity was expanding.

“Across the board the data was strong. It was a royal flush,” said Michael Woolfolk, currency strategist at Bank of New York.

Woolfolk said the increase in the Midwest business barometer was particularly welcome, calling it “definitely good news for the underlying fundamentals of the U.S. economy.”

A drop in the index below 50 in November had presaged a similar move by the Institute for Supply Management’s national gauge of factory activity.

Although the employment component of the Chicago index fell to 45.8 in December from 49.4 in November, showing a second straight month of contraction, prices paid held steady and new orders rose.

“The survey suggests expansion of manufacturing, but it is just a regional survey. We have to wait until Tuesday for the Institute for Supply Management [national] report,” said Michelle Meyer, an economist at Lehman Bros. in New York.

The upbeat reading on home resales followed a report Wednesday that showed a stronger-than-expected pace of new-home sales last month as well.

“It lends credence to the opinion that we’re a good portion of the way through the housing slump,” Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston, said of the existing home sales report.

The number of existing homes on the market slipped 1% to 3.82 million units, the Realtors’ trade group said. The November sales pace marked a 7.3-month supply, down from 7.4 months in October.

Although sales volume rose for a second straight month, median home prices were off 3.1% from year-ago levels, the fourth consecutive monthly drop.

The Realtors association Chief Economist David Lereah said the data held “mixed news” but signaled a stronger housing sector with inventories and sales stabilizing. “The housing contraction has bottomed,” he said.

Earlier Thursday, the Labor Department said the number of workers applying for first-time jobless benefits rose 1,000 to 317,000 last week, suggesting stable labor market conditions. Wall Street economists had expected claims to rise to 320,000.