New home sales bounced by roughly 3% in April to an annualized rate of 526,000 units, the first increase since October 2007, analysts from RBS Greenwich Capital said.

Even though April's rise is welcome after months of steady dips, the advance was because of the revision in March's initial projection of 526,000 units , which was revised down to 509,000 units. This, according RBSGC analysts, does not cause confidence that housing demand is rebounding.

New home sales in April dropped 42% from the year-ago period, which is the biggest dip since 1981, according to analysts. Similar rebounds in new home sales in April, July, and October 2007 all proved short-lived, so it is evidently too early to say that housing demand has bottomed out, according to RBSGC analysts.

However, RBSGC said that today's reading offers some glimmer of hope that perhaps considerably lower new home prices are finally starting to attract some investors.

Analysts placed more emphasis on the Office of Federal Housing Enterprise Oversight and Case-Shiller price indices that have shown steep dips in the last year, than the median new home price, which showed a 1.5% year-over-year increase in April.

According to RBSGC, April sales rebounded in the Northeast (+41.7%), Midwest (+5.8), and West (+8.3%), but slipped in the South (-2.4%).

In the meantime, new home inventories continued on their downward trend last month. The number of new homes for sale fell by 11,000 to 456,000 units, which RBSGC analysts said is the lowest level since June 2005. They added that the number of completed new homes for sale dropped for the third straight month in April, decreasing by 5% to 181,000 units, and falling by 18,000 from the all-time high of 199,000 registered in January.

Despite this, builders will have to continue to offer incentives and slash prices to work down completed new home inventories. According to RBSGC analysts, this is a process that will probably take at least the rest of this year, and possibly into the first half of next year.

Meanwhile, last Friday the National Association of Realtors reported that existing home sales inched dipped by at an annualized pace of 1% in April to 4.89 million units, which is slightly better than expectations.

After the washout in home sales last summer and fall, the figures have been essentially steady since December with the exception of a one-off upward blip in February.

According to RBSGC, the readings in the last five months are 4.91, 4.89, 5.03, 4.93, and 4.89. Analysts are not prepared to stick our flag in the sand and definitively guarantee that home sales have bottomed, but they think that home sales are in the process of forming a bottom and will not go much lower from current levels, analysts said.

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