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WASHINGTON, Jan 26 (Reuters) - Sales of previously owned U.S. homes rebounded unexpectedly in December, closing out a bleak year in which prices dropped by a record 15.3 percent, an industry trade group said on Monday.
Existing home sales increased 6.5 percent to a 4.74 million unit annual rate from a downwardly revised 4.45 million rate in November, beating market expectations for a 4.40 million pace, a National Association of Realtors report showed on Monday.
For the whole of 2008, existing home sales fell 13.1 percent to 4.91 million units, the lowest since 1997.
U.S. stocks <.DJI> extended gains on news of the surprise
rebound, while Treasury debt prices
"That's good news, but it may be too soon to get really excited it yet. The problem is that the labor markets will weaken going forward," said Michael Schenk, senior economist at Credit Union National Association in Madison, Wisconsin.
"That might not completely overwhelm the effect of lower interest rates, but people are reluctant to buy a home when they think their job prospects are not so great.'
The median national home price fell 15.3 percent from the year earlier to $175,400, the largest decline since the NAR started keeping records in 1968 and probably the largest since the Great Depression, Lawrence Yun, NAR chief economist told reporters.
The inventory of existing homes for sale fell 11.7 percent to 3.68 million units from 4.16 million in November, translating into 9.3 months of supply.
"It appears some buyers are taking advantage of much lower prices," said Yun. "The higher monthly sales gain and falling inventory are steps in the right direction, but the market is still far from normal balance conditions."
The collapse of the U.S. housing market fractured the global financial system and pushed the U.S. economy into a recession that many analysts fear could the longest and deepest since the end of World War II.
Analysts reckon that the economy might not emerge from the year-long slump unless the housing market, the main trigger of the global financial and economic turmoil, starts stabilizing.
The housing market crash has reduced household wealth, causing a sharp decline in consumer spending, which accounts for about two thirds of U.S. economic activity. (Reporting by Lucia Mutikani; Editing by James Dalgleish)