INSTANT VIEW: Existing home sales rise in December

NEW YORK (Reuters) - The pace of sales of existing homes in the rose 6.5 percent in December, but the median home price dropped by a record 15.3 percent compared to the same period the year earlier, a National Association of Realtors report showed on Monday.

For the first time in six months the Conference Board's Index of Leading Economic Indicators surprisingly rose in December, gaining 0.3 percent, boosted primarily by money supply.

KEY POINTS:

EXISTING HOME SALES: Existing home sales increased to a 4.74 million unit annual rate from a downwardly revised 4.45 million units in November. For the whole of 2008, existing home sales fell 13.1 percent to 4.91 million units, the lowest since 1997. 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 and probably the largest since the Great Depression, Lawrence Yun, NAR chief economist told reporters. Analysts polled by Reuters had expected existing home sales to set a 4.40 million unit pace in December. 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.

LEADING INDICATORS: Wall Street analysts had expected the leading index, a gauge of future economic conditions, to fall 0.3 percent after a 0.4 percent unrevised decline in November. Real money supply, which the Conference Board said has been a "continued and very large positive contribution" to the index, rose 0.99 percent in December, after steep increases of 0.66 percent in November and 0.74 percent in October. The last time the money supply component fell was in August, when it was -.05 percent.

COMMENTS:

WIN THIN, SENIOR CURRENCY STRATEGIST, BROWN BROTHERS HARRIMAN,

NEW YORK:

"Even before the data the dollar was weakening and we had run through a bunch of stops between 1.3050 and 1.3150 (on the euro/dollar). We had already had the bulk of the move ahead of the data. Better than expected but not really market moving."

CHARLIE SMITH, CHIEF INVESTMENT OFFICER, FORT PITT CAPITAL

GROUP, GREENTREE, PENNSYLVANIA:

"I would need to know if the massive foreclosure trend is included in the data.

"Housing is basically what led us into this thing. If we get any glimmer of hope in housing, that would be a huge change. If we can get clarity on the foreclosure aspect of this number, that could be very bullish (for the economy) and bearish for government bond prices."

MICHAEL SCHENK, SENIOR ECONOMIST, CREDIT UNION NATIONAL

ASSOCIATION, MADISION, WISCONSIN:

"This is the first time in a while that we have seen a return to normalcy in the relationship between lower mortgage rates and increased sales. 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. 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.

"Housing inventories dropped, but normally, inventories are about 6-1/2 months' supply so we're still a long way away from that.

"Rates clearly are the bright spot if you're looking for any good news and that was behind most of the change. We're probably very close to the lowest that these rates will ever be so there may be some piling on because of that. Prices coming down helped, also. Affordability is higher than it has been.

RALPH MANIGAT, SENIOR BOND STRATEGIST, 4CAST LTD, NEW YORK:

"These numbers are not signs of rosy days ahead. We are not out of the woods. We are off the highs (in Treasuries) but there's very little follow-through."

MARKET REACTION: STOCKS: U.S. equity indexes extend gains after better-than-expected existing home sales. BONDS: U.S. Treasury debt prices extend losses. DOLLAR: U.S. dollar extends gains vs yen.