The 3% increase in sales of existing homes reported by the National Association of Realtors the morning of February 27 is being viewed as relatively good news by financial markets: at least sales did not plummet, and falling prices could help draw down inventories. But concerns over so-called "hidden inventory" and tumult in the subprime mortgage market hung over the housing sector.

The monthly report from NAR reported that 6.46 million were sold in January, the highest rise since June, at a median price of $210,600, a decline of 3.1%. Inventories of unsold homes rose 2.9% to a 6.6-month supply.

Analysts were generally cheered by the numbers but remain cautious. Margaret Whelan and Susan Maklari of UBS pointed out in a report that the sales numbers beat both their in-house estimates and those of the street. However, the report stated, "We believe the rise in existing home sales reflects the benefit of milder weather through January in addition to stabilizing demand trends. Given February's more severe weather, however, we would not be surprised to see this trend reverse next month. We will continue to watch for changes to key metrics, such as inventory and prices, ahead of the important spring selling season."

A more positive view was taken by Michael Michael Rehaut, Jennifer Consoli and Ray Huang of JP Morgan Securities. Its report on the NAR data stated, "We believe inventories continue to demonstrate an improving trend, and hence, reiterate our positive sector stance. We believe leading fundamentals-spec., inventories, can rates, and order trends-are beginning to stabilize or are on the cusp of recovering over the next few quarters."

Patrick Newport, U.S. Economist for Global Insight, was more cautious in his report: "It is tempting to say that the worst is now behind us, but that would be premature. In recent weeks, the subprime mortgage market has taken a beating because of an unexpected surge in defaults. Subprime lenders have responded by tightening their lending standards. This will have some effect on housing demand, and therefore sales."

Concerns remain in all quarters that there may be many more homes that have not been listed due to the softness in the market or that have been pulled from the market. Moreover, the bump in January sales may have been due in part to mild weather in December, when deals were made for January closings. January's weather could retard the sales numbers for February.

The NAR housing numbers were released amid a flurry of negative news in the financial markets that was casting doubt upon the health of the overall U.S. and global economies. In the U.S., durable goods orders were off 7.8% in January, according to the Commerce Department.

Freddie Mac announced it would quit buying risky subprime mortgage paper on September 1.

A broad selloff in Chinese financial markets spooked Wall Street and markets in Europe. And Alan Greenspan, no longer the voice of God but still perhaps the most-listened-to person in matters relating to the economy, raised the possibility of a recession in the U.S. economy in the second half of 2007 in a Monday speech to a business group.

Still, in another incidence of moderately good news, the Conference Board reported that consumer confidence in February rose to a five-and-a-half year high. The index rose to 112.5 from January's 110.2.