According to an AP article posted over the weekend, sales of new homes rose more than 6 percent in October. Rather than rejoice over this small bit of good news, analysts poured over the data and attributed the rise to strong results in the South - an area that has been particularly hit hard in this housing downturn. The report showed that while home prices rose in 11 major metro areas in September, they also fell in 9. Across the nation home resales were up, with the Midwest making up the largest gains.

The housing market seems to be right in step with the national economy which is weathering a rather lengthy recession. The overall outlook is more like a game of ping-pong than a firm statement of how things are trending. No one seems comfortable making any firm statements and good news seems always paired with bad. For example. while there are some lights at the end of the tunnel - a decline in unemployment filings and an increase in consumer spending, orders for costly manufactured goods fell unexpectedly.

There's no question that if the upward trend in housing continues, it would help fuel the economic recovery. The real trouble seems to be that the current administration might be doing all it can to harm industry. With the current cap and trade on the books as well as the EPA classification of CO2 emissions as a poisonous gas (CO2 is the "food" that fuels our trees and all living plants), who knows if any sustained recovery is possible in the short term. Spending on home building and home remodeling pushed up the economy in the third quarter of 2009 - the first time this happened in nearly four years.

Prior to the housing bust, the building industry poured thousands of homes into the market, causing a massive inventory once the proverbial... uh, fertilizer, hit the fan. Almost overnight, builders had to scale back on construction to thin out the abundance of homes on the market. In October there were nearly a quarter million new homes for sale in the US, the lowest inventory level in nearly a generation. According to people who study this stuff for a living, that's about 6.7 months of supply at our current rate of consumption, a good indicator that builders may begin ramping up construction shortly.

"If you're looking for a sign that builders will need to start swinging their hammers again soon, this is it."

- Mike Larson, real estate analyst at Weiss Research

Continuing the good news/bad news trend, new home sales were up more than 5 percent from a year ago. This is the first yearly increase since November 2005. While a small bump in terms of year-to-year growth, numbers are actually up over 30 percent from January (the bottom). Even with these gains, sales are down 69 percent from their peak in July 2005. The Federal Reserve is continuing to keep interest rates low, and according to Freddie Mac, the average interest rate for a 30-year fixed mortgage continuing to fall below 5 percent.

The industry is reeling from a confusing mix of low interest rates and falling home prices due to foreclosures. The foreclosures are tied to the rising rates of unemployment and the result is a strange optimistic-pessimistic blend of good news following the follies of the past. Standard & Poor's/Case-Shiller index of 20 major cities was released Tuesday and indicated that Las Vegas and Seattle are continuing their trend of falling home prices for 12 straight months, while prices have risen for 6 months in Denver, Washington D.C. and Chicago. It seems to be a game of small percentages, with analysts getting excited over 1 and 2 percent gains and losses. For example, the S&P/C-S data also showed that nationally where the median price of a new home was $212,200 in October, almost the same as a year earlier, but up almost 1 percent from September's level of $210,700.

The surge in sales was driven entirely by a 23 percent increase in the South. Tom Brown, a partner with custom home builder Crown Home Builders, S.C., said much of the sales activity in his market has been in the lower price ranges, from $125,000 to $180,000. Sales of homes greater than $250,000 are still slow.

"Hopefully, when more good reports come out, people will have more confidence about buying," Brown said.