WASHINGTON (Reuters) - New U.S. single-family home sales rebounded modestly in February as a surge in the West offset sharp declines in other regions, pointing to a gradually improving housing sector amid a dearth of properties available on the market.
The Commerce Department said on Wednesday home sales rose 2.0 percent to a seasonally adjusted annual rate of 512,000 units. January’s sales pace was revised up to 502,000 units from the previously reported 494,000 units.
“The housing market is improving, though in fits and starts and not uniformly across the nation,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
New single-family home sales were driven by a 38.5 percent jump in the West last month, which reversed January’s 32.7 percent dive. Sales plunged 24.2 percent in the Northeast and tumbled 17.9 percent in the Midwest. They fell 4.1 percent in the populous South.
Excluding the West, home sales were down 8.1 percent. New home sales account for about 9.2 percent of the housing market.
The report came on the heels of data on Monday showing a 7.1 percent drop in sales of previously owned homes in February, which was blamed on tight inventories, bad weather and difficulties adjusting the data during the month with a leap day.
The S&P homebuilding index .SPLRCHOME was down 0.88 percent, in line with a broadly weaker U.S. stock market.
A separate report from the Mortgage Bankers Association showed a dip in home buying activity last week, with its seasonally adjusted Purchase Index falling 1.0 percent from a week earlier. The index, however, increased 25 percent from a year ago.
While economists and realtors expect a fairly busy spring selling season, they caution that the persistent shortage of homes on the market, which is limiting options for buyers and pushing up prices, was a challenge.
“Existing and new home prices are rising quickly and that’s really taking a bite out of housing affordability. New and existing home inventories are very lean, that can hurt sales,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania.
“Spring sales should be decent, but won’t be as good as they could have been if there was more inventory on the market and affordability was a little bit stronger.”
There were 1.88 million existing homes available for sale in February, up 3.3 percent from January, but 1.1 percent lower than a year ago. House prices have been rising by more than 5 percent, outpacing wage growth.
While the inventory of new homes on the market rose 1.7 percent in February to the highest level since October 2009, it remained less than half of what it was at the height of the housing bubble.
At February’s sales pace it would take 5.6 months to clear the supply of houses on the market, unchanged from January.
With the strengthening labor market boosting household formation and mortgage rates still low by historical standards, housing fundamentals remain solid. The sector should continue to contribute to economic growth this year.
“We expect the housing market to continue to be a moderate but unremarkable contributor to growth for the remainder of 2016,” said Sophia Kearney-Lederman, and economic analyst at FTN Financial in New York.
Reporting by Lucia Mutikani; Editing by Andrea Ricci