Sales of U.S. previously owned homes jumped more than forecast in December as buyers tried to lock in low mortgage rates before the economic recovery pushed borrowing up further.

Purchases of existing houses, which are tabulated when a contract closes, increased 12 percent to a 5.28 million annual rate, the most since May, figures from the National Association of Realtors showed today in Washington. The median price dropped 1 percent from a year earlier, and the share of sales represented by foreclosures climbed.

Buyers are returning to the housing market after a government tax credit expired in the middle of 2010, indicating the drop in prices and cheap lending rates are making homes more affordable. At the same time, unemployment in excess of 9 percent and record foreclosures are among concerns that have prompted Federal Reserve policy makers to follow through with a second round of quantitative easing.

“Sales have been recovering steadily from depressed levels,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. ‘A better economic backdrop should boost confidence and push potential homebuyers off the sidelines.”

For all of last year, purchases decreased to 4.91 million, the fewest since 1997.

Existing home sales were forecast to rise to a 4.87 million rate in December, according to the median of 73 forecasts in a Bloomberg News survey. Economists’ estimates ranged from 4.5 million to 5.07 million after November’s 4.68 million pace.

Price Falls

The median price decreased to $168,800 from $170,500 in December 2009.

The number of previously owned homes on the market dropped 4.2 percent to 3.56 million. At the current sales pace, it would take 8.1 months to sell those houses compared with 9.5 months at the end of the prior month.

Month’s supply in the eight months to nine months range is consistent with stable home prices, the group has said.

The housing industry is trying to stabilize after demand see-sawed due to a buyer tax incentive of as much as $8,000, which required contracts to be signed by April 30 of 2010 and closed by the end of September. Existing-home sales slumped to a 3.84 million rate in July 2010, the weakest in a decade’s worth of record keeping, reflecting the expiration of the credit.

Earlier, purchases had surged to an almost three-year high 6.49 million pace in November 2009, the month the tax credit was originally due to end. It was subsequently extended.

Less Construction

A lack of sales and an overhang of unsold houses is discouraging builders from taking on projects. Housing starts fell in December to a 529,000 annual rate, the lowest level since October 2009, Commerce Department figures showed yesterday.

Lennar Corp., the third-largest U.S. homebuilder by revenue, is among companies bracing for a slow rebound. The Miami-based builder on Jan. 11 reported fourth-quarter profit that beat analyst estimates on cost cuts and earnings from its distressed-investing unit.

“The housing recovery will traverse a long and bumpy road,” Stuart Miller, chief executive officer, said in a conference call that day. Still, “we’ve seen some early signs of gradual stabilization in the market.”

An unemployment rate of at least 9.4 percent since May 2009 is fueling a supply of distressed properties. The number of homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, according to RealtyTrac Inc. an Irvine, California-based data seller.

“Activity in residential real estate and new home construction remained slow across all Districts,” the Fed said Jan. 12 in its Beige Book report, based on anecdotal information that central bankers will use to determine policy at their meeting next week.