February home sales rise 5.1%, biggest jump since 2003

— -- Existing homes sales rose in February as prices fell sharply due to the nation's increasing supply of distressed properties.

Sales of existing homes jumped 5.1% in February, reversing the decline in January, according to a report Monday by the National Association of Realtors. Many economists believe the drop in January was an anomaly and that last month's rise in home sales could be the first sign of stabilizing prices.

Sales rose in February to a seasonally adjusted annual rate of 4.72 million units from a pace of 4.49 million units in January, but they are still 4.6% below the 4.95 million-unit level in February 2008.

"It was nice to see," says Joel Naroff, with Naroff Economic Advisors. "February and December were similar (in showing an increase). If there is another similar increase in March, I will think prices may be stabilizing. Sales have pretty much hit bottom."

Distressed properties accounted for up to 45% of transactions in February.

The national median existing-home price was $165,400 in February, down 15.5% from $195,800 a year ago. That was the second-largest drop on record.

Lower interest rates also are bringing buyers off the sidelines. For the week ending March 13, mortgage loan application volume increased 21.2% on a seasonally adjusted basis from a week earlier, according to the Mortgage Bankers Association. The average interest rate for 30-year fixed-rate mortgages decreased to 4.89% from 4.96%.

"Buyers are eligible for lower rates, and prices have come down," says Brian Bethune, with IHS Global Insight. "A lot of things are factoring in to potentially generate more sales."

The West saw a 2.6% increase in sales, and the median price of $204,600 was about 30% below a year ago. California, where the median listing price is beginning to rise for the first time in three years, led the region.

In the Northeast, sales jumped 15.6% in February from January. The median price was $251,200, down 4.8% from a year ago.

Existing-home sales in the Midwest increased 1%. The median price was $131,000, which is 7.8% below February 2008.