House sales rose sharply in February, reflecting the usual bounce after the holiday period, but ASB economist Jane Turner warned not to read too much into the latest figures.
"We place little weight on this month's recovery. The trend in house sales remains flat, despite some monthly volatility, with housing demand yet to make a convincing recovery.
"While large declines in the mortgage rates have prevented housing demand falling further, the level of house sales remains weak," she said.
However, Real Estate Institute of New Zealand president Mike Elford welcomed the improved figures, citing a significant turnaround in inquiry levels.
The numbers of sales and median prices were up in all but three out of 12 regions compared with January's figures.
"January was an exceptionally bleak month and there is no doubt the figures were affected by the holiday period.
"While we must still take a cautious approach, the February figures seem to indicate that lower interest rates and real estate as an investment option are having a positive impact on the market."
The number of home sales nationally in February was 5228, a big jump on the record low of 3706 in January.
That was still notably lower than the corresponding period in 2008, which had 6356 sales, a massive drop on the 9357 properties which sold in February 2007, he said.
A rise occurred in the number of sales in all districts apart from Central Otago-Lakes, which had a minimal drop from 78 to 76 properties in February compared with January.
"The bounce back from the horrific January figures is welcome but we must still acknowledge we're dealing with light volumes compared with recent years."
The median house price also improved on January figures to $330,000, up $5000 on January and only slightly lower than the $337,500 median house price in February last year.
In nine out of the 12 districts, higher median prices were recorded in February.
The only drops were in Auckland (down from $442,000 to $421,500), Taranaki (down from $266,750 to $260,000) and Central Otago-Lakes, which dropped from $457,500 to $425,000.
The length of time it took to sell a house - 62 days in February - was consistent with the January figure of 59 days, Mr Elford said.
"While this is considerably longer than the 50 days in February 2008 and 32 days in February 2007, it is pleasing to note there has been a drop in the number of days to sell compared with last month in eight out of 12 districts."
Ms Turner said the increase in the days to sell suggested there remained a large mismatch between demand and supply.
Prospective house buyers were able to take their time in a low-demand market.
"Unwillingness to accept lower prices may also be holding time-to-sell dates high. The housing market remains oversupplied and we expect this to continue to push house prices lower."
Median house prices were not the best long-term measure of house prices, over time as they were not adjusted for changes in the composition of sales, she said.
Quotable Value housing data was adjusted and showed house prices were down nearly 9% for the three months to February compared with year-ago levels.
Housing demand remained weak and was likely to remain so as consumer confidence remained soft, Ms Turner said.
Economic uncertainties and reduced job security would weigh on housing investment decisions and would continue to curb interest in the housing market, despite below-average mortgage rates.
Agency data suggested there was a large overhang of listings was on the market and, given the large excess of supply, buyers would remain in a position to drive prices lower, she said.
"The ongoing weakness in the housing market is indicative of cautious behaviour New Zealand households are undertaking in response to the fallout of the global financial crisis.
"Given the global nature of the shock, there is little the Reserve Bank can do to revive demand other than continuing to cut the official cash rate to help drive domestic borrowing costs lower."
Ms Turner expected a 1% cut in the official cash rate today, bringing it down to2.5%.
