Indications of a bottom in the housing market are likely false signals, as home prices continue to plunge.

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Indications of a bottom in the housing market are likely false signals, as home prices continue to plunge.

On Friday, the National Association of Realtors said September sales of previously owned homes rose by the largest amount in five years, and inventories fell 1.6 percent.

Sales of single-family homes, which do not include town homes, condos and co-ops, rose 6.2 percent, the fastest growth in more than six years. But foreclosure sales by banks at rock-bottom prices juiced the numbers. Up to 40 percent of September sales were linked to foreclosures.

The number of homes that received foreclosure notices in the third quarter grew 71 percent to 766,000 from a year earlier, according to RealtyTrac. More than 2,700 Americans lost their homes each day during the quarter. It could get worse.

Due to the poor job market and tighter lending standards, “foreclosures are not likely to go down in this environment,” says Thomson Reuters economist Jeoff Hall. “Households are as highly leveraged as some of these companies have been.”

Hall says we won’t see a bottom in housing until there’s a better job market.

Monday may have held one true ray of hope. Sales of new homes rose unexpectedly as prices fell to the lowest level in five years. Inventories fell 25 percent.

Declining new-home inventories is one positive sign, says Patrick Newport, economist at IHS Global Insight, noting, “Builders have begun to make necessary adjustments.”

He says the first indication of a bottom will come when prices stop falling, allowing a more accurate assessment of home values.

One measure that could help, Hall notes, is a loan-guarantee plan backed by Federal Deposit Insurance Corp. Chairwoman Shelia Bair. It would use some of the $700 billion earmarked to bail out banks to help homeowners escape foreclosure.