Feb. 27 (Bloomberg) -- Sales of previously owned homes in the U.S. rose more than forecast in January to a seven-month high as lower prices and warm weather brought out more buyers.

Purchases increased 3 percent last month to an annual rate of 6.46 million, up from a 6.27 million December rate that was higher than previously reported, the National Association of Realtors said today in Washington. Sales fell 4.3 percent compared with a year earlier.

The report suggests that housing, recovering from its worst slump in 15 years, may be less of a burden on growth this year, economists said. Cheaper homes and low borrowing costs are spurring sales, while a plunge in January housing starts reported this month shows builders are trying to reduce a glut of unsold properties.

``A lot of households that were sitting on the sidelines now feel more comfortable buying,'' said Nariman Behravesh, chief economist at Global Insight Inc. in Lexington, Massachusetts. ``The demand side is recovering. The supply side will take a few more months.''

Consumer Confidence Rises

Another report today showed the Conference Board's consumer confidence index unexpectedly rose to the highest in more than five years this month, lifted by rising wages and an expanding job market. The proportion of people who said jobs are hard to get declined to the lowest since August 2001.

After the reports, the yield on the benchmark 10-year U.S. Treasury note was up 3 basis points at 4.59 percent.

Home resales were expected to increase last month to an annual rate of 6.24 million from December's originally reported 6.22 million, according to the median estimate of 67 economists in a Bloomberg News survey. Estimates ranged from 5.95 million to 6.4 million.

Sales of existing homes, which account for about 85 percent of the U.S. housing market, are recorded when a contract is closed. New home sales, recorded when a contract is signed, are considered a more timely barometer of the housing market.

David Lereah, the Realtors' chief economist, said sales have been above the September low for four consecutive months and ``it appears we hit bottom in September.''

``The country as a whole is getting close to balance,'' he said.

Median Price

The median price of an existing home fell 3.1 percent last month from a year ago to $210,600, the Realtors group said.

Another report today showed the price of homes in 20 U.S. metropolitan areas fell in December for a fifth month.

The S&P/Case-Shiller home-price index dropped 0.7 percent during the month after a 0.4 percent decrease in November. Prices in the 12 months through December 2006 were up 0.5 percent, the smallest gain since records began in 2000.

The supply of homes for sale increased to 3.549 million last month, from 3.45 million the prior month, the Realtors said.

The number of previously-owned homes on the market at the end of January represented 6.6 months' worth at the current sales pace, the same as in December.

Resales of single-family homes rose 3.5 percent last month to an annual rate of 5.69 million, the report said. Sales of condos and co-ops fell 0.1 percent to a 767,000 rate.

Regional Breakdown

Purchases rose in all regions except the Northeast, where they were unchanged. They rose 5.6 percent in the West, 4.8 percent in the Midwest and 2 percent in the South.

Federal Reserve Chairman Ben S. Bernanke during his semi- annual monetary policy report to Congress said there are ``tentative'' signs of stabilization in housing, and the slowdown hasn't hurt other sectors of the economy to ``any significant extent.''

Still, it is ``too early to say this problem is over,'' Bernanke said. ``Even if housing demand falls no further, weakness in residential investment is likely to continue to weigh on economic growth over the next few quarters.''

Homebuilders in the U.S. began work last month on the fewest new houses since August 1997 as high inventories and colder weather discouraged new projects. Housing starts slumped 14.3 percent, and building permits, a sign of future construction, fell 2.8 percent, the Commerce Department reported on Feb. 16.

Toll Brothers Inc., the largest U.S. luxury home builder, said fiscal first-quarter profit slid 67 percent on expenses to write down the value of land after a year of plummeting home sales. Toll cut its profit forecast for the fiscal year and lowered its estimate for home deliveries in 2007 as orders fell.

``There are too many soft markets at this stage of the selling season to call a general upturn in the new home market,'' Chief Executive Officer Robert Toll said in a Feb. 22 conference call.

Still, the rate of order cancellations slowed to 29.8 percent in the first quarter from 36.9 percent in the prior quarter, and pent-up demand is building in some markets, the company said.

Some housing-related businesses are forecasting better times. Fourth-quarter profit at Lowe's Cos., the world's second- largest home-improvement retailer, fell less than analysts anticipated, and the company said last week that sales will start to pick up in the second half of the year.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: February 27, 2007 10:18 EST