The struggling U.S. housing market is expected to fall a little further as it searches for a bottom, but home prices are seen ticking up modestly in 2012, according to a Reuters poll released on Friday.

Economists were divided on whether the worst would be over for the housing market by the end of the year or if it will take more time to reach a floor.

Existing home sales are expected to improve only modestly. The forecasts from the poll are consistent with expectations the housing sector will continue to limp along in a weakened state for years to come.

Housing has been unable to find its footing since its collapse in 2007, despite multi-billion dollar government programs and ultra-low interest rates.

Indeed, fixed and one-year adjustable mortgage rates hit new record lows in the week ended Sept 8, but analysts did not expect it to spur a rush of buying.

Concerns another recession is looming, high unemployment and tight credit have kept buyers out of the market, leaving a glut of homes for sale that has driven down prices.

While so-called distressed sales at drastically reduced prices has helped absorb some of the homes on the market, ongoing foreclosures are expected to keep the market anemic.

There's still a huge pipeline of homes that are going to be foreclosed upon and the weak job market certainly isn't helping, said Scott Brown, chief economist at Raymond James, in St. Petersburg, Florida.

A recovery in the housing market is dependent on improvement in the labor market and broader economy, analysts said.

One of the big concerns is you've got a lot of homes where the mortgage holder is still underwater and most of those homeowners will continue to make payments, said Brown.

It gets to be a problem, however, if somebody loses their job, somebody gets sick, there's a divorce or something where the home has to be sold.

U.S. home prices -- as measured by Standard & Poor's/Case-Shiller 20-City Composite Home Price Index -- will fall 3.8 percent for the year, before stabilizing and gaining 0.8 percent in 2012, according to the median forecast of 22 economists in the Reuters poll taken over the past week.

The expectations were improved from the previous Reuters housing poll in June, which forecast prices would fall 5.0 percent this year and rise just 0.5 percent next year.

The forecasts for the changes in the home price index for this year had a wide range, from a decline of 14.0 percent to a gain of 0.1 percent. The forecasts for 2012 had a smaller gap, from a decline of 6.0 percent to a gain of 4.0 percent.

Of 28 economists polled, 14 said that prices had either already hit bottom this year or would by the fourth quarter. Twelve respondents said prices won't reach a trough until 2012, while one forecast 2013 and one expected it would take until 2014.

In the third quarter, the pace of existing home sales is expected to come in at a 4.78 million annualized rate and will edge up to 4.95 million in the fourth quarter. Sales of previously owned homes were at an annual rate of 4.67 million units in July, according to data from the National Association of Realtors.

Economists saw the rate of home sales coming in at 5.1 million for both the first and second quarter of next year.

New foreclosures peaked in 2009, but the inventory of foreclosed homes will decline only slowly, said David Berson, chief economist at mortgage insurer PMI Group.

Economists forecast the average 30-year mortgage rate would be 4.5 percent for the year, lower than June's forecast for 4.82 percent.

(Polling by Sumanta Dey and Somya Gupta)

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