January home sales data expected to show increase (AP)

WASHINGTON – Sales of previously occupied homes are expected to be up slightly for January after a sharp drop in December as demand remained stable despite a stormy winter in much of the country.

Economists polled by Thomson Reuters forecast that completed sales last month rose almost 1 percent to a seasonally adjusted annual rate of 5.5 million, up from 5.45 million in December. That month's sales were down 17 percent from a month earlier.

But given a spate of negative housing and economic news — including a record low for new home sales this week — economists are prepared to be disappointed.

"I wouldn't be shocked if we see a weaker number," said Jennifer Lee, an economist with BMO Capital Markets.

The National Association of Realtors' report is scheduled for release Friday morning.

It comes after the government reported Wednesday that sales of new homes plunged 11 percent to a record low in January.

The report, which measures signed contracts to buy homes rather than completed sales, was a surprise to economists who were expecting a 5 percent increase over December's pace.

The main question hanging over the housing market this year is whether interest rates will rise, and by how much. The Federal Reserve's $1.25 trillion program to push down mortgage rates is scheduled to expire on March 31.

After that program runs out, mortgage rates should not spike, but rather rise gradually to about 6 percent over the next year, predicts Cameron Findlay, chief economist at LendingTree.com. That will mean homebuyers may have to reduce their price range, and could put downward pressure on prices.

Another unknown is the impact of a tax a tax credit for first-time homeowners. To give the market an added boost, lawmakers extended it until April 30, and added a new credit of up to $6,500 for existing homeowners who move.

"When the tax credit got extended last year, I really saw a huge drop" as borrowers felt far less hurried, said Christa Ross, a Realtor with Re/Max Select Realty in Cranberry Township, Pa. "Now what we are seeing is that picking up again," she said, adding that agents in her office have been swamped since the beginning of January.

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Associated Press Writer Bob Salsberg contributed to this report from Boston.