New U.S. home sales rebounded unexpectedly last month, but were still the second-worst on record and remained well below last year's levels, according to data released Wednesday.
The results provided some hope that developers have slashed prices and stopped building to such a large extent that sales have finally hit bottom and the worst may be in the past. Prices, however, are likely to keep falling for months as builders continue to clear out their stock of unsold homes.
"We are prepared to hazard the view that the post-Lehman (Brothers) meltdown is now over and the market is stabilizing," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. "That's not the same as a recovery, but it is better than continued declines in sales."
The Commerce Department said sales rose 4.7 percent in February to a seasonally adjusted annual rate of 337,000 from an upwardly revised January figure of 322,000. Even after the revision to January's sales results, the month remained the worst on records dating back to 1963.
Economists surveyed by Thomson Reuters had expected February sales to fall to a pace of 300,000 units.
The report "is another faint but nonetheless encouraging sign that the economic slide may be moderating," wrote David Resler, chief U.S. economist at Nomura Securities.
Since the report reflects signed contracts to buy new homes rather than completed sales, it could reflect the early impact of a new a new $8,000 tax credit for first-time buyers signed by President Barack Obama in mid-February.
Despite the boost, February's sales were still down by more than 40 percent from the same month a year earlier. The median sales price fell to $209,000, a record 18 percent drop from the same month last year. The median price is the midpoint, where half sell for more and half for less.
At the current sales pace, the government said it would take a year to exhaust the supply of new homes on the market. The glut of unsold homes and competition from deeply discounted foreclosed properties puts even more downward pressure on prices and on builders' profits.
Fallout from the housing crisis is one of the biggest problems facing the country. It has played a central role in the U.S.
recession, now in its second year. Foreclosures have spiked, financial companies have racked up multibillion-dollar losses and home builders like Pulte Homes Inc., D.R. Horton Inc. and Lennar Corp. have been clobbered.
Investors, however, cheered at the new home sales numbers and bid up shares in the major builders as much as 18 percent in midday trading.
To lure buyers, President Barack Obama's stimulus package included an $8,000 first-time homebuyer tax credit. Plus, the Obama administration has unveiled a $75 billion plan to curb foreclosures, which are aggravating problems in the housing market and the overall economy.
In February, sales rose almost 10 percent in the South from a month earlier, and 7 percent in the West. They dropped about 9 percent in the Midwest and 3 percent in the Northeast.
"I'm hopeful the worst is over," said David Crowe, chief economist for the National Association of Home Builders. "I don't think we're quite out of the woods either. I think we will bounce around a bottom for a month or two."
In another encouraging sign this week, sales of previously occupied homes also jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties.
The National Association of Realtors said Monday that sales of existing homes grew 5.1 percent to an annual rate of 4.72 million last month, from 4.49 million units in January.
