Gene J. Puskar, Associated Press
This Oct. 18, 2011 photo, shows new home construction in a development in Canonsburg, Pa.

Purchases of new homes fell in January, but it's still a good thing.

Sales dropped 0.9 percent for new homes to a seasonally adjusted 321,000 annual pace from 324,000 in December that was stronger than previously reported, according to Bloomberg.

The Commerce Department originally reported a 2.2 percent decline to a 307,000 annual rate, but later adjusted the number.

But the good news isn’t that sales fell. The important thing is that the rate beat economists’ forecasts.

Bloomberg News surveyed 77 economists who predicted a median rate of 315,000, which was a rise compared to the original December number.

That means that though home sales dropped in January, it still exceeded economists’ predictions, which is a sign that the housing market is stabilizing.

“Sales are very low but are getting better,” Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg. “It’s a combination of an improving economy and labor market.”

More people are starting to shift to used homes as a result of an uncertain market.

Sales of new homes only rose 3.5 percent year over year from January 2011, according to Fox News. Purchases of used homes rose to record highs last month.

The report from the Commerce Department also showed the price of a new home had dropped 9.6 percent from January 2011 when prices were at a median price of $217,100.

"The report shows traction for a housing industry anxious to ascend from the bottom," Mitchell Hochberg, principal at Madden Real Estate Ventures in New York, told Reuters. "To climb back, the foreclosure overhang needs to clear, prospective homebuyers must find it less difficult to qualify for a mortgage and consumer confidence must improve."

As the market showed signs of improvement, confidence in the economy rose with it.

The Thomson Reuters/University of Michigan’s index on consumer sentiment rose to 75.3 in February from 75.0 in January. That’s the highest the index has been in a year.

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