April 23 (Bloomberg) -- Sales of existing U.S. homes in March stayed near a four-month average, and prices rose from February, a sign the housing recession has stopped getting worse.

While today’s figures from the National Association of Realtors showed purchases fell more than forecast to an annual rate of 4.57 million, economists noted that the sales level is hovering near the level it reached in November. The Labor Department said separately that U.S. jobless claims rose to 640,000 last week, matching analysts’ forecasts.

Prices for home resales posted their biggest monthly gain since June 2005, and NAR chief economist Lawrence Yun said that some regions are seeing multiple bids on properties. Today’s housing figures indicate that the record-low mortgage rates fueled by the Federal Reserve are stanching the industry’s hemorrhage.

“We’re seeing signs of some pickup in some of the sales activity -- we’re getting a lot of reports that banks are successfully selling off foreclosures,” Stephen Gallagher, chief U.S. economist at Societe Generale in New York, said in a Bloomberg Television interview. Still, “it’s a painful process, nobody said it wouldn’t be painful,” he said.

The continued deterioration in the U.S. job market means that any rebound in housing is unlikely until late this year or 2010, analysts said. The Labor Department’s report showed that the number of Americans continuing to collect unemployment insurance climbed to 6.14 million in the week that ended April 11, the 12th straight all-time high.

Stocks, Treasuries

Homebuilder shares, which fell following the report, recovered to end the day up. The Standard & Poor’s 500 Supercomposite Homebuilders Index rose 1 percent to 240.76. Treasuries rose, pushing the yield on the 10-year note down to 2.92 percent at 4:29 p.m. in New York from 2.94 percent late yesterday.

Falling home-loan rates, spurred by record purchases of mortgage securities by the Fed, are combining with increased affordability to sustain demand.

The rate for a 30-year fixed home loan declined to 4.80 percent from 4.82 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today. Earlier this month the measure hit 4.78 percent, the lowest in Freddie Mac data going back to 1971.

More than Projected

Economists forecast resales would fall to a 4.65 million annual rate, according to the median of 69 projections in a Bloomberg News survey. Last month’s sales pace was still higher than the decade-low 4.49 million reached in January.

“This fits with an idea of stabilization of housing demand,” said Jonathan Basile, an economist at Credit Suisse Holdings Inc. in New York. “We’ve seen housing affordability go up across the country. The bad news has been diminishing.”

From a year before, existing home sales were down 7.1 percent in March. Distressed properties accounted for about 50 percent of all home resales last month, the group said, up from about 45 percent in previous months.

The median price slumped 12 percent from March 2008, to $175,200, and climbed 4.2 percent from February. While prices normally increase during this time of year, the gain was more than twice as large as in prior years, NAR’s Yun said.

The figures underscored a report from the Federal Housing Finance Agency yesterday that showed home prices rose 0.7 percent in February and 1 percent in January, the first consecutive monthly gains in almost two years.

Less Inventory

The number of houses on the market dropped 1.6 percent to 3.74 million. At the current sales pace, it would take 9.8 months to sell those homes, up from 9.7 months in February. The agents’ group has said a five to 6 months’ supply is consistent with a stable market.

Resales of single-family homes decreased 2.8 percent to an annual rate of 4.1 million. Sales of condos and co-ops dropped 4.1 percent to a 470,000 rate.

The decrease in total sales last month was led by an 8 percent slump in the Northeast. Purchases also fell in the West and in the South and were unchanged in the Midwest.

A weak job market is one reason economists project foreclosures will keep rising as unemployed owners fall behind on mortgage payments. A total of 803,489 properties received a default or auction notice or were seized in the first quarter, the highest since records began four years ago, said RealtyTrac Inc., an Irvine, California-based seller of mortgage data.

First-Time Buyers

The surge in foreclosures is causing prices to drop, making homes more affordable, particularly for first-time buyers, the real-estate agents’ group said. First-time buyers accounted for about 51 percent of sales last month, the NAR said.

The NAR’s affordability index, which tracks mortgage rates, home prices and incomes, surged in February to the highest level in 20 years of data.

Fed Chairman Ben S. Bernanke said last week that “we have seen tentative signs that the sharp decline in economic activity may be slowing,” citing housing and retail sales. Central bankers are due to meet again next week.

The gain in distressed properties may be hurting sales of new homes.

Lennar Corp., on March 31, reported a wider first-quarter loss and said orders fell 28 percent. The company also said orders tumbled in January and February.

“The housing market continued its downward trend throughout our first quarter,” Lennar Chief Executive Officer Stuart Miller said in a statement. “Despite historically low interest rates and some indicators pointing toward market stabilization, low consumer confidence, increased unemployment and growing foreclosure rates negatively impacted new home sales in most of our markets.”

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net; Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: April 23, 2009 16:33 EDT