US home prices have gone so low that more buyers are getting back into the market, the latest figures show.

Both home construction starts and home sales were up significantly in February.

One surprisingly good month won't equal a full recovery yet, as total sales were still down compared to one year earlier and prices were still slipping. But the surprising month-to-month increase in activity has many in the real estate industry in the US hopeful again.

At the very least, the February figures showed buyers were seizing on the deep discounts on foreclosed homes and other distressed properties.

The National Real Estate Association of Realtors (NAR) said home sales were up 5.1% in February, the largest increase since July 2003. However, some 45% of these were foreclosures or short sales.

Prices plunged by almost 16% from a year ago in February and are expected to keep falling well into 2009 due to the recession in the US and continued job security fears. But the figure can be misleading as not all homes have fallen so dramatically in price as those in foreclosure.

Similarly to Australia, the lower end price bracket has seen the most activity lately in the US, led by first homebuyers. Lawrence Yung, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges.

"Because entry level buyers are shopping for bargains, distressed sales accounted for 40-45% of transactions in February," he said. "Our analysis shows that distressed homes typically are selling for 20% less than the normal market price, and this naturally is drawing down the overall median price."

The national median existing-home price for all housing types was US$165,400 (A$235,000) in February, down 15.5% from a year ago when the median was US$195,800 (A$278,000) and conditions were close to normal.

The number of housing starts in February, up 22%, rose for the first time since June, according to the US Commerce Department. It was an unexpected rise to a seasonally adjusted 583,000 total starts last month, defying predictions by economists that it could decline to 450,000.

Housing starts are still well down from a year earlier, however, when over 1.1 million new homes were begun.