For the first time in seven months, the Commerce Department reported that new-home sales increased 4.7% in February to a seasonally adjusted rate of 337,000 units. It’s still a long way from where sales were, but Joe Robson, chairman of the National Association of Home Builders, is taking it as a sign that the market is finally hitting bottom, according to a statement posted to NAHB.org.
 
One possible contributor to the upswing: Prices finally may be low enough to draw buyers back into the marketplace for new homes. According to the S&P/Case-Shiller Home Price Indices released on Tuesday, prices for new homes continued to fall in January to lows not seen since 2003 (based on the composite indexes). The 20-city composite index has fallen 19% since January 2008; it declined 2.8% from December.
 
And housing starts climbed in February as well, primarily a result of multifamily units but single-family homes managed to climb 1.1%. (Read Behind the Surprising Uptick in February Housing Starts for more analysis from Editor Lindsay Young on housing starts.)
 
NAHB Chief Economist David Crowe suggests that many variables contributed to the shift: 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 also warns that many negatives still plague the market, including tight credit markets and high foreclosure inventories. But, the signs are encouraging and recovery may be on the horizon, as early as mid-year.”