March 25 (Bloomberg) -- Purchases of new homes in the U.S. unexpectedly rose in February from a record low as plummeting prices and cheaper mortgage rates lured some buyers.

Sales increased 4.7 percent to an annual pace of 337,000 after a 322,000 rate in January, the Commerce Department said today in Washington. The median sales price fell 18 percent from February 2008, the biggest year-on-year drop since records began in 1964, and the glut of properties on the market dwindled.

“It’s a step in the right direction,” said Jonathan Basile, an economist at Credit Suisse Holdings USA in New York, who had forecast sales would rise. “Lower prices and mortgage rates are starting to get buyers back. We still have a lot of supply to absorb before things get back to normal.”

Demand for new homes has been limited by the highest jobless rate in a quarter century and shrinking household wealth, indicating housing may not rebound quickly even as steps to cut borrowing costs and reduce mortgage defaults take hold. Another Commerce report today showed orders for durable goods also unexpectedly rose last month.

Stocks climbed after the figures indicated the economy may be stabilizing. The Standard & Poor’s 500 index rose 2.3 percent to 824.38 at 10:37 a.m. in New York. Treasury securities fell.

Economists forecast new home sales would drop to a 300,000 annual pace from an originally reported 309,000 rate in January, according to the median estimate in a Bloomberg survey of 65 economists. Forecasts ranged from 280,000 to 340,000.

The median price of a new home decreased from a year earlier to $200,900, the lowest since December 2003.

Last 12 Months

Sales of new homes fell 41 percent from February 2008.

Inventories decreased. The number of homes for sale dropped to a seasonally adjusted 330,000, and the supply of homes at the current sales rate fell to 12.2 months’ worth from 12.9 months.

Sales in February were led by a 9.7 percent gain in the South and a 6.6 percent increase in the West.

Purchases of existing homes rose 5.1 percent to an annual rate of 4.72 million from 4.49 million in January, the National Association of Realtors said March 23 in Washington. The median price slumped 15.5 percent from a year earlier, the second- biggest drop on record, and distressed properties accounted for 45 percent of all sales.

Existing home sales make up 90 percent of the housing market. Data are compiled from closings and reflect contracts signed weeks or months earlier.

New-home sales, which account for the remaining 10 percent, are considered a timelier indicator because they are based on contract signings.

More Applications

Mortgage applications in the U.S. increased last week as lower borrowing costs led to a surge in refinancing. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 32 percent to 1,159.4 in the week ended March 20, from 876.9 the prior week.

Still, the slide in demand for homes has left builders struggling. Toll Brothers Inc., the largest U.S. builder of luxury homes, reported its sixth consecutive quarterly loss this month and Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, reported a loss for the 10th straight three-month period.

Demand may “remain far below normalized levels,” Chief Executive Officer Ara Hovnanian said in a March 10 statement.

Obama Proposal

The Obama administration on March 23 released details of a proposal to buy up to $1 trillion of the troubled assets clogging banks’ balance sheets, building on a Federal Reserve initiative to commit as much as $1.1 trillion more to thaw credit markets.

The government also plans to spend $275 billion to help keep as many as 9 million Americans in their homes and reduce foreclosures. That program includes a tax break of as much as $8,000 for first-time homebuyers that wouldn’t require repayment.

The National Association of Realtors’ affordability index rose to a record in January, helped by lower home values and mortgage rates.

Orders for long-lasting goods unexpectedly jumped in February on a rebound in demand for machinery, computers and defense equipment, separate Commerce figures showed earlier today. The 3.4 percent increase was the biggest gain in more than a year and the first in seven months.

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

Last Updated: March 25, 2009 10:38 EDT