New home sales decreased a bit in January, however only after the government said the final quarter of 2011 ended strong than was predicted.

An upward revision to December's data as well as a decrease in the supply of homes on the added to growing signals of a beginning of a recovery in the housing market, however.

The Commerce Department stated on Friday that sales fell 0.9 percent to a seasonally adjusted annual rate of 321,000-units. December's sales rate was revised upward to 324,000 units, the highest it has been in a year, from the previously reported 307,000 units.

Economists polled by Reuters had predicted that sales would be at a 315,000-unit rate. Compared to January last year, new home sales grew 3.5 percent.

In spite of weak sales in February, details of the report showed more signs of improvement in the housing market, with the months' supply of homes on the market falling to 5.6 months - the lowest it has been since January of 2006. That was .1 month lower than in December. A 6-month supply is generally considered ideal, with higher readings signaling steep price declines.

The average price for a new home grew 0.3 percent to $217,100 - the highest level it has bee since October. Compared to January last year, the average sales price was down 9.6 percent. Also, the inventory of new homes on the market was the lowest on record.

Pierre Ellis, an economist at Decision Economics, said the improvement lends "additional support to the housing market," and mirrors other positive signals in the industry.

Data this week showed home resales grew in January, to the highest they have been in 1 ½ years. Homebuilders confidence approached a five-year high this month and builders are starting a greater number of residential projects, mirroring the economy's generally positive tone.

However, both sales and home construction have stayed far below their 2005 levels. New homes sales remain below the 700,000-per-year rate that economists feel is the mark of a healthy markets.

The Federal Reserve has given a number of things other policymakers could do to help the down market and is considering buying even more mortgage-backed securities to drop mortgages rates even further.

New home sales last month increased in two of the four regions, but dropped significantly in the Midwest and in the West. The new home market faces tough competition from previously owned homes, of which, many are selling with large discounts due to foreclosures.

Economists warn that housing is a long way from a full recovery. Builders have halted work on many projects because it's been hard for them to receive fundig or to compete with cheaper resale homes. For many Americans, home buying is still too large a risk more than four years after the burst of the housing bubble.

Although new-home sales represent less than 10 percent of the housing market, they have an outsize impact on the economy. With each home built, an average of three jobs are created and generates roughly $90,000 in tax revenue, according to the National Association of Home Builders.

One major reason for the low 2011 sales is that builders had to compete with foreclosures and short sales — when lenders accept less for a house than what is owed on the mortgage. The end of 2011 was the worst on record for single-family home building. But in a hopeful sign, single-family home construction, which makes up 70 percent of the market, increased in each of the last three months.

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For statistical information on new home sales, please go to: http://www.census.gov/construction/nrs/