Is the beleaguered US housing market finally bottoming out, or is this just a temporary pause in US housing's continuing decline?

Sales of existing homes in the US were marginally higher in November - they rose 0.4 per cent to an annualised rate of 5 million - according to a report by the National Association of Realtors (NAR), a trade group, released on Monday 31 December. Total existing home sales includes single-family residences, townhouses and condominiums.

It was an improvement over October, and came as surprise to experts who had been expecting November to show a further decline. After sellers cut prices sharply, inventories of unsold existing homes declined marginally to 10.3 months from 10.7 months in October, compared to the 7.3 months level of November 2006.

But is it really an indication that the US housing slump has bottomed out? Experts disagree on whether the better-than-expected performance represents just a temporary pause in the sector's continuing decline, or constitutes evidence that housing demand may be bottoming out at last.

Existing home sales are usually less volatile than new-home sales. They began to weaken slowly from a monthly high of just over 6.6 million annualised units early in 2007. But disruptions in the mortgage lending market hammered real estate prices the in late summer. And, over the past three months, existing-home sales have levelled off around a five-million-unit annual rate.

Lawrence Yun, the Realtor group's chief economist, says the figures are a sign that the housing market is stabilising. But few people would agree that the housing sector, which has been in a painful near-freefall for well over a year, is out of the woods.

For, the NAR has reported that new-home sales dropped 9 per cent on a month-to-month basis in November, even though builders offered deep discounts in a bid to reduce their supply of unsold homes. The industry verdict seems to be that more discounts may be needed to lure buyers back into the market.

Analysts say that while the latest data does suggest that increased buying power and lower rates are bringing some buyers into the market, they continue to expect a downward trend in home sales in the months ahead.

Interest rates have come down in recent months, but the turmoil in the credit markets caused by widespread defaults from 'sub-prime' borrowers has caused mortgage providers to tighten the previously relaxed home-loan standards. The new tough norms, combined with a softening labour market, promises to keep pressure on the housing sector for most of 2008.

The NAR data shows that the median price of existing homes is at $210,200, down 3.3 per cent from November 2006. But the housing market is falling at different rates in different regions of the US, just as the earlier boom was more pronounced in certain parts of the country.

In the western USA, which has enjoyed a strong and uninterrupted housing boom all these years, the median price of $325,800 is down 6.8 per cent from a year ago. Existing-home sales are down 25 per cent from a year ago.

The north-east also saw a powerful surge in home prices in previous years. Here, the November median price slid 3.2 per cent to $258,300. Home sales in the region are down 19.4 per cent year-on-year.

In the mid-west, where housing inflation has not been as rapid, the fall has been less punishing. The median price of a mid-west home is $163,000, down just 0.5 per cent from a year ago. Home sales are down 16.9 per cent in the region.

So, despite the positive news, the supply-demand balance remains decidedly unfavourable for both new and existing homes alike, say analysts, and the recent stability in the existing homes segment is very possibly a temporary phenomenon.