Consumer confidence rose to an eight month high in December as households grew more upbeat about job prospects, but other data showed the housing market likely remains a drag on economic growth with house prices falling 3.4 percent in the October year.

The rise in sentiment offered hope for a pick up in consumer spending a tepid performance in November.

Consumers are more optimistic that business conditions, employment prospects and their financial situations will get better, the Conference Board said in a statement.

While consumers are ending the year in a somewhat more upbeat mood, it is too soon to tell if this is a rebound from earlier declines or a sustainable shift in attitudes.

The U.S. Conference Board said its index of consumer confidence rose to 64.5 in December from a downwardly revised 55.2 in November. Economists had expected a reading of 58.3 from a previously reported 56.0 in November.

Labor market conditions have improved in recent months, with the unemployment rate falling to a 2-1/2 year low in November and applications for first time jobless benefits are the lowest they have been since April 2008.

The Conference Board's present situation index rose to 46.7 this month --- the highest since September 2008 -- from 38.3 in November. The expectations index surged to 76.4 from 66.4 in November.

HOUSING STILL IN DOLDRUMS

However, U.S. single-family home prices fell more than expected in October, data showed Tuesday, raising doubts that recent signs of improvement in the housing market would be sustained.

The S&P/Case Shiller composite index of 20 metropolitan areas dropped 1.2 percent on an unadjusted basis, worse than economists' expectations for a 0.5 percent fall. Prices dropped 0.6 percent in September.

For the year, home prices were down 3.4 percent in October.

Recent data have shown an improvement in home sales volumes and rising confidence among builders who have been breaking ground on new projects.

U.S. home sales rose in November, adding to hints of recovery. The National Association of Realtors said on Wednesday last week that sales of previously owned homes increased 4.0 percent from October to an annual rate of 4.42 million units.

The median sales price in the NAR survey rose 2.1 percent from October, but was still down 3.5 percent from a year ago at $164,200.

In light of the more positive housing numbers we've seen in the last week or so, this (S&P/Case Shiller data) might be a bit of a disappointment, said Omer Esiner, chief market strategist at Commonwealth Foreign Exchange in Washington.

The data on Tuesday showed prices declined in October in 19 of the 20 cities.

(Reporting By Lucia Mutikani; Editing by Padraic Cassidy)

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