The housing market isn't yet in the clear, but it's also not as

weak as Monday's home-sales report might suggest.

The National Association of Realtors is expected to announce an 11.6% drop in December existing-home sales to a seasonally adjusted annual rate of 5.78 million, according to economists polled by Dow Jones.

The large drop is exaggerated by the initial Nov. 30 expiration of the government's first-time home buyer tax credit, which previously boosted sales by some 28% from August through November to an annualized rate of 6.5 million units, the most since early 2007.

The tax credit has been extended through June, but most analysts don't expect sales growth to resume until February or March. In the meantime, further declines in existing-home sales, which make up nearly 90% of the market, are sure to raise concerns about the recovery in housing and the broader economy.

But there are scattered signs of improvement. Home-price declines have slowed; the S&P/Case-Shiller index out Tuesday is expected to show prices in 20 major cities down about 5.4% in November from a year ago, compared with a trough of nearly 20%.

Inventories of new homes are down to their lowest level in nearly 40 years. New home sales, which the Commerce Department reports Wednesday, are expected to rise 4.2% to an annualized pace of 370,000 units after a sharp decline the prior month.

Residential construction added to gross domestic product in the third quarter for the first time since 2005, and is expected to provide additional support to GDP this year and next. Meanwhile, one of the sector's most reliable leading indicators, building permits, have risen for two straight months, including a 10.9% surge in December, and are up about 15% from a year ago.

In California, a bellwether state for housing, inventories of existing homes hit a five-year low in December of 3.8 months' supply, according to the California Association of Realtors, from a high of 16.6 months in 2008.

'We think recovery is underway, but there will be bumps in the road,' said Barclays Capital economist Michelle Meyer. In other word, bumps don't portend a double downward dip