Still, sales remain depressed and ended 2011 well below healthy levels.
The National Association of Realtors said Friday that sales increased 5 per cent last month to a seasonally adjusted annual rate of 4.61 million, the best level since January 2011 and the third straight monthly increase.
For the year, sales totalled only 4.26 million. While that's up from 4.19 million the previous year, it's below the six million that economists equate with healthy housing markets.
Sales are increasing at a time when the market is flashing other positive signs. Mortgage rates are at record-low levels. Homebuilders have grown slightly less pessimistic because more people are saying they might be open to buying a home this year. And home construction picked up in the final quarter of last year.
The median sales price rose 2.3 per cent to $164,500 in December.
Hiring has also improved, which is critical to a housing rebound. Applications for unemployment benefits are near a four-year low. The unemployment rate fell in December to its lowest level in nearly three years. And companies are coming off their best six-month stretch for hiring since 2006.
Still the housing market has a long way to go before it is fully recovered from the housing bust four years ago. In the last four years, home sales have slumped under the weight of foreclosures, tighter credit and falling price.
Fewer first-time buyers, who are critical to a housing recovery, are in the market for a home. Purchases by that group fell last month to make up only 31 per cent of sales. That's down from 35 per cent in November. In healthy markets, first-time buyers make up at least 40 per cent.
At the same time, homes at risk of foreclosure made up a third of all sales last month. In healthy markets, they comprise 10 per cent of sales. Investors are increasingly buying homes priced under $100,000.
Still, Sales rose across the country in December. They increased on a seasonal basis by more than 10 per cent in the Northeast, 8.3 per cent in the Midwest, 2.9 per cent in the South and 2.6 per cent in the West.
The glut of unsold homes declined to 2.38 million homes. At last month's sales pace, it would take a nearly 7 months to clear those homes. Analysts say a healthy supply can be cleared in about six months.