Commerce Department Says New Home Sales Rose in February

Sales of new, single-family homes rose unexpectedly in February, according to figures released Wednesday morning by the Commerce Department. Coming on the heels of a reported similar increase in sales of existing homes, it's the latest in a number of recent indicators that the ongoing recession may be starting to loosen its grip.

Seasonally adjusted new home sales rose an estimated 4.7 percent above January's level, for a total of 337,000 units. At the same time, sales remain weak; the February 2009 figures are still 41 percent below the February 2008 estimate of 578,000. It appears likely the rise was due to a combination of low mortgage interest rates and declining home prices, which may be drawing home shoppers back into the market.

Figures may be fuzzy

The February figures need to be taken with a grain of salt. The statistics are based on sample surveys with a large margin of error, meaning it's quite possible that new home sales actually declined from last month. It's equally likely that sales were higher than reported, though. However, the figures closely match a 5.1 percent monthly increase in existing home sales reported earlier this week by the National Association of Realtors, lending credibility to the numbers.

Home sales, durable goods boost stocks

The stock market was buoyed by news of the increase, as well as by a reported increase in orders for durable goods, a traditional sign of an improving economy. The Dow Jones Industrial Average was up nearly 160 points by noon, reversing the losses of the day before and returning to its upward trend of the week before.

"It's a step in the right direction," said Jonathan Basile, an economist at Credit Suisse Holdings USA in New York, quoted in Bloomberg. "Lower prices and mortgage rates are starting to get buyers back. We still have a lot of supply to absorb before things get back to normal."

Too soon to celebrate

Still, analysts remain concerned that the economy still has a long way to go, and that the current good news could be just a blip on the economic radar. As an example of how weak the economy remains, the Commerce Department reported that median prices for new home sales in February were $200,900, sharply down from $245,300 a year earlier.

The average new home sales price was $251,000, also down considerably from the February 2008 average of $301,200, but representing a slight uptick from the January 2009 estimate of $239,100.