U.S. existing home sales rose 5 per cent in December 2011 from a year ago to 4.61 million units annualized. While slightly below expectations, the trend is still positive and could lead to more buyers coming off the sidelines, according to BMO Economics and Harris Private Bank.

"December's gain was the third rise in a row and is the highest number of sales since January of last year. It is now up 40 per cent from the lows hit in July 2010," said Doug Porter, Deputy Chief Economist, BMO Economics.

For all of 2011, sales climbed 2.5 per cent to 4.29 million units, fully erasing a drop of 3.4 per cent in 2010. Sales of single-family homes are up for the third straight month – hitting a 1 1/2-year high, and condos posted a sizeable gain, reaching an 8-month high.

The backlog of total existing homes as well as single-family units dropped around 10 per cent last month to their lowest levels since 2005.

"The combined effects of record low mortgage rates, near record high affordability, a more promising economic recovery, job creation, and low prices are beckoning homebuyers out of the woodwork," added Porter.

The share of homes bought by first-timers dropped to 31 per cent while repeat purchasers rose to 48 per cent.

Jack Ablin, Chief Investment Officer for Harris Private Bank, noted the increased activity may give the overall market a boost of confidence. "While some buyers may believe that better deals will be available for those that wait, stable prices and increased activity will go a long way to instil some urgency into buyers' psyche," he added.

"We are seeing some very encouraging signs in the housing sector and rising consumer confidence all of which is helping to drive this positive trend," said Randy Raup, Senior Vice President of Retail Lending.  "With interest rates at historic lows and housing prices appearing to be stabilizing, more consumers have been contacting our branches and mortgage loan officers to determine which of our various mortgage loan products best meet their financial and home ownership goals".