New home sales dropped in February

NEW YORK (CNNMoney) -- New home sales fell in February, dashing construction industry hopes that the long-overdue housing recovery may be finally arriving.

The Census Bureau reported Friday that new homes sold at an annualized pace of 313,000 during the month, adjusted for seasonal factors. That was a 1.6% decline compared with January's 318,000 sales but 11.4% above last February's 281,000.

Sales fell short of the 323,000 that analysts had expected.

There was a bit of good news for home builders in the report. The median price of new houses sold jumped to $233,700, well above the $217,000 median recorded in January.

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The supply of new homes available for sale dropped slightly during the month to 150,000, a 5.8-month supply.

New home sales remain very depressed compared with the mid-2000 boom years. In July. 2005, new homes sold at a 1.389 million annual pace.

New home sales data is eagerly anticipated because increases in construction translates into broad economic gains. All sorts of jobs, in construction, trucking, and furniture, appliance and carpet manufacturing, rise along with new home construction.

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Each new home built during a year supports about three jobs, according to David Crowe, chief economist for the National Association of Home Builders (NAHB).

The decline came as somewhat of a surprise to Crowe. He said NAHB members have reported a boost in shoppers looking for new homes as abnormally warm weather brought out more house hunters than usual this winter.

The increase in shoppers has not led to a rise in actual buying, he said, and tight credit has been one factor hurting sales.

"Many people come in pre-approved for mortgages but, ultimately, can't pass the underwriting process," he said. "They're qualified but they can't get a high-enough appraisal on a house."

If the appraisal comes in low, mortgage banks won't provide all the funds needed for buyers to complete their purchases. That has short-circuited many new home sales recently.