Home sales rise as housing market rebounds. Slowly.

U.S.  home sales rose in July, helped by low interest rates and increased hiring although the data still pointed to a slow recovery in housing that will provide only slight support for the economy.

Sales of previously owned homes rose 2.3 percent to an annual rate of 4.47 million units, the National Association of Realtors said on Wednesday. The level of sales was just below analysts' expectations of a 4.52 million-unit rate.

The U.S. housing market, in a deep rut since the 2007-09 recession, has been a bright spot in the economy this year.

The NAR said home prices rose last month from a year earlier and fewer homes were sold under distressed conditions - those following foreclosures or in short sales.

"The housing sector has turned a corner, and demand will continue to improve," said Michelle Girard, an economist at RBS in Stamford, Connecticut. "The data also underscores the fact that improvement will be gradual."

Many economists think residential construction will give a small boost to the economy this year.

But home building plays a much smaller economic role than it did before the recession, and a turn for the worse in the broader economy could easily undo housing's fledgling recovery. While interest rates are low, it is still hard for many people to get a mortgage.

"The combination of a subdued outlook for U.S. economic growth and tight mortgage credit conditions suggests that a normalization in home sales remains some way off," said Ed Stansfield, an economist at Capital Economics in London.

The pace of sales has rebounded since bottoming out in 2010, but remains about 40 percent below its 2005 peak. Indeed, the current sales pace is roughly in line with 1997 levels.

HOUSEHOLD DEBT STILL HIGH

With stubbornly high unemployment and a weaker global economic picture, many economists think the Federal Reserve could launch a new round of bond buying to help prop up the economy as soon as next month.

Minutes from the central bank's July 31-Aug. 1 meeting, released on Wednesday, showed the Fed is likely to deliver another round of monetary stimulus "fairly soon" unless the economy improves considerably.

The economy continues to be hindered by problems caused by the housing bubble that began to unwind in 2006, helping to trigger the deep recession.

Households are still heavily in debt, and many owe more on their homes than they are worth, making those properties harder to sell.

The number of existing homes on the market has fallen sharply since last year, though inventory rose slightly in July to 2.4 million homes. That was 1.3 percent higher than in June but 23.8 percent below its year-ago level. At the current pace of sales, the inventory would last 6.4 months.

Distressed home sales - which are often sold at deep discounts - made up 24 percent of sales in July, down from 25 percent in June, the NAR said.

That could be helping to lift sale prices, said Daniel Silver, an economist at JPMorgan in New York.

The median price for a home resale was $187,300 in July - 9.4 percent higher than in the same month a year earlier.

Most economists expect U.S. economic growth will pick up a bit in the second half of the year, barring potential problems from abroad like a worsening in Europe's debt crisis.

U.S. stocks fell on Wednesday and U.S. government debt yields declined as weak export data from Japan underscored the headwinds facing the global economy.

A separate report showed applications for U.S. home mortgages tumbled last week, with demand for refinancing drying up as mortgage rates jumped to their highest level since late June.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 7.4 percent in the week ended Aug 17.

Fixed 30-year mortgage rates jumped 10 basis points to average 3.86 percent. Even with the increase, rates are still at relatively cheap levels after falling to record lows in recent month.