The US Commerce Department reported Friday that new home sales rose 1.1 per cent to an annual rate of 640,000 units in February, compared with a revised 633,000 units in the previous month. The figure is seasonally adjusted.

The January figure was revised significantly. new home sales rose by just 1.8% to 633,000 units in January, compared to an initial estimate of a 7.2% increase to 670,000 units.

New home sales figures fluctuate from month to month and are often revised.

Sales of new homes have been strong, increasing for five consecutive months. The broader sector is now in recovery mode as existing home sales also rose by almost 15 per cent in February.

Economists surveyed by the Wall Street Journal had predicted that new home sales in February would total 650,000 units.

However, new home sales were still down 19% compared to the previous year.

Key details: The median sales price of new homes sold in February was $438,200.

The supply of new homes for sale fell by 1.2 per cent between January and February, equivalent to an eight-month supply.

Regionally, the West led the nation in new home sales by 8.1 per cent.

Sales in the Midwest fell by 1.4 per cent, while sales in the Northeast plummeted by 40 per cent.

The Big Picture: Buyers are highly sensitive to mortgage rates, so the drop earlier this year prompted a jump in sales.

New home sales have been holding up better than existing home sales because homebuilders are more willing to cut prices or offer incentives than homeowners, who have less incentive to budge from their existing homes.

The rebound in new home sales looks strong at the moment, despite the instability of mortgage rates. However, if homebuilders find it more difficult to obtain credit, future starts may fall and eventually sales will fall as well.

Market reaction: In early trading Thursday, stocks rose on the Dow Jones Industrial Average SPX. 10-year Treasury yields BX:TMUBMUSD10Y fell below 3.5%.

Stocks of builders, including D.R. Horton, Inc. DHI, 2.36%, Lennar Corp LEN, 2.07%, PulteGroup Inc. PHM, 2.34%, and Toll Brothers Inc. TOL, 2.27% opened higher in morning trading.