The worst of the U.S. housing slump may be over thanks to strong rallying of home builder stocks and falling mortgage rates, analysts said.

Although data released Thursday showed U.S. home prices making their smallest quarterly gain in eight years, some forward-looking indicators point to a stabilizing residential market, analysts said in remarks published by the Los Angeles Times.

Home builder stocks rallied sharply Thursday after an analyst's upgrade. The sector was one of the strongest in November, with the Standard & Poor's home builder index gaining 10 percent last month, extending a rally that began in July and suggesting that investors see an improving outlook.

In the third quarter, U.S. home prices rose 7.73 percent over year-ago levels, off a peak of 13.94 percent in mid-2004. On a quarterly basis, prices rose 0.86 percent, the smallest increase since the second quarter of 1998.

In California, prices in the third quarter rose 10.2 percent year over year, making it the 16th-best-performing state for home values, according to the Office of Federal Housing Enterprise Oversight, which compares prices of the same houses sold or refinanced over time.

On a quarterly basis, statewide prices ticked up a scant 0.62 percent, in line with other data showing low to flat price gains in many California locales.

This indicated that the sector might have bottomed out. The optimistic view was echoed by a small but growing chorus, including Federal Reserve Chairman Ben S. Bernanke and his predecessor, Alan Greenspan.

But even optimistic analysts say the sector may not be out of the woods yet, with some once-hot markets still vulnerable to further price and sales declines.

The nation's housing market is still soft compared with the last three years, when prices and sales soared by double-digit percentages in many parts of the U.S., including California.

There are three times as many homes for sale today and sales have declined as would-be buyers wait to see whether prices will fall.

But recent drops in bond yields, which in turn have lowered mortgage rates, are helping to keep the housing sector from free- falling, some analysts say.

The average rate on a 30-year fixed-rate mortgage in the U.S. fell to 6.14 percent this week, according to mortgage giant Freddie Mac. That was the lowest rate in 10 months and below the year-ago rate of 6.26 percent. The 15-year fixed rate and the one- year adjustable rate also declined.

What's more, the once-dizzying pace of price appreciation has been replaced by low to moderate increases without calamitous results.

Source: Xinhua