Providing a welcome glimmer of hope that potential home buyers are starting to return to the market, sales of newly built, single-family homes rose for the first time in seven months this February, according to Commerce Department figures released today. The report showed a 4.7 percent gain in new-home sales to a seasonally adjusted annual rate of 337,000 units in February, along with upwardly revised figures for each of the previous three months.

“This is an encouraging sign that the market may finally be reaching a bottom,” said Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “Consumers are beginning to take advantage of the first-time home buyer tax credit, historically low mortgage rates, very affordable home prices and the great selection of homes they have to choose from in the midst of a real buyer’s market. For those with good credit and job security, the stars are all aligned to buy a home at this time.”

“February’s gain may also be tied to demand delayed in January, when potential buyers were waiting to see what kind of incentives would be included in the economic stimulus package,” said David Crowe, NAHB Chief Economist. “Keep in mind that the January-February average for new-home sales is still below the fourth quarter 2008 average, and we do expect sales numbers to bounce around a bottom before climbing slowly mid-year and beyond. Nevertheless, it is apparent that measures within the recent stimulus package (including the first-time buyer tax credit as well as higher mortgage ceilings for conforming loans), Fed moves to lower mortgage rates, and home builder sales incentives are helping to reverse the three-year slide.”

Crowe cautioned that certain negative factors must still be addressed, including tight credit conditions for home buyers as well as the still-rising inventory of foreclosed homes on the market.

Indicating that builders are keeping a tight rein on inventories, the number of unsold new homes on the market continued to decline for the 22nd consecutive month to 330,000 units in February. The months’ supply also declined, to 12.2 in February, down from 12.9 in the previous month.

Regionally, new-home sales rose strongly in the two largest markets in February, with gains of 9.7 percent in the South and 6.6 percent in the West. However, sales numbers declined in the Northeast and Midwest, by 3.3 percent and 9.1 percent, respectively.

Source: National Association of Homebuilders, March 25, 2009