Sales of new single-family homes unexpectedly rose 4.7 percent in February, according to the Department of Commerce, the fastest pace in 10 months.
The increase put new home sales at an annual pace of 337,000, which is up from a revised 322,000 in January.
"The rise in new home sales suggests that the drop in mortgage rates and prices has increased affordability enough to bring some buyers back to the market. Guarded optimism for the spring showing season is sustained," says Pierre Ellis, a senior economist for Decision Economics.
"It's a favorable turn of events and it looks as if builders are taking it seriously and they're on the ground and not being foolishly optimistic anymore."
However, February sales were still down by more than 40 percent from the same month a year earlier. And the median sales price in February skidded to $165,400 from $195,800 a year earlier, marking the second-largest drop on record, according to the Associated Press. Prices are off 28 percent from their peak in July 2006.
At the current sales pace, the government predicts it would take one year to sell all the new homes on the market. The National Association of Realtors says sales of existing homes grew 5.1 percent to an annual rate of 4.72 million in February from 4.49 million in January.
"I'm hopeful the worst is over," says David Crowe, chief economist for the National Association of Home Builders. "[But] 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."