New home sales fell by roughly 3% in January to 588,000, which is in line with RBS Greenwich Capital analysts 585,000 projection. Analysts noted that revisions to prior months were marginal. Sales dropped in every region except for the West, where the numbers rebounded by roughly 2%, after a 9% dip in December. After November's 13% dive in new home sales, which might have been overstated by a steep tightening in mortgage credit, the drops in December and January have been less, RBS said. There has recently been some evidence -- such as the uptick in the February National Association of Home Builders buyer traffic gauge as well as a record-high number of people in the February preliminary University of Michigan data stating that home prices were attractive -- to imply that recent price dips have sparked some interest with potential homebuyers. While it is too early to call a bottom considering the current tightness in mortgage credit, RBS analysts still believe that home sales could stabilize by the spring or summer. The number of new homes for sale dropped by 11,000 in January to 482,000 and has dipped by 87,000 units since peaking at 570,000 in August 2006. But, RBS analysts pointed out that this decline is indicative of a significant decrease in the number of homes for sale under construction. The number of completed homes for sale has risen by 45,000 from August 2006 and stood at a near-record 195,000 last month. This is why even though there are currently less homes in the pipeline, the stock of completed new homes for sale is still high, analysts said. Builders will likely hold back in terms of construction activity through most of this year, but the focus would likely stay on sales since only a flattening out of new home sales will allow builders to work off the overhang of new home inventory, RBS said the report released today.

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