width=331Sales of newly built homes fell for a fourth straight month to a record low in February, but another rise in new orders for durable goods offered hope that the economic recovery remained on course.

The Commerce Department said on Wednesday sales of new single-family homes fell 2.2 percent to a 308,000 unit annual rate from 315,000 units in January. Markets had expected sales to edge up to a 320,000 unit annual pace.

In a second report, the department said orders for long-lasting manufactured goods rose 0.5 percent in February, rising for the third straight month, and January's figures were revised sharply upward to show a 3.9 percent increase.

Markets had expected orders to gain 0.7 percent in February from the previously reported 2.6 percent rise.

U.S. stock indexes slipped slightly on the housing report, while Treasury debt prices were steady at lower levels. The U.S. dollar was unchanged.

The housing market is really struggling to find its footing despite huge government support efforts. The near-term outlook for the housing market remains quite poor, said Zach Pandl, U.S. economist at Nomura Securities International in New York.

The data came on the heels of report on Tuesday showing existing home sales fell for a third straight month in February while the supply of houses on the market jumped.

Sales have barely responded to the extension and expansion of a popular tax credit, which boosted purchases in the second half of 2009, raising concerns over the fragile housing market's recovery just as a key pillar of support is being dismantled.

The Federal Reserve will end purchases of mortgage-related securities next week, which had lowered the cost of home loans to record lows.

A report by the Mortgage Bankers Association on Wednesday showed U.S. mortgage applications fell for a second straight week, with demand for home loan refinancing sinking to its lowest level in a month as interest rates jumped.

DURABLE ORDERS ON THE RISE

The sustained rise in durable goods orders came as businesses rebuilt inventories by the largest margin in more than a year and pointed to continued strength in manufacturing.

This shows the strength in the manufacturing sector. You already created manufacturing jobs in January and February. We are at the cusp of creating jobs in the rest of the economy, said John Canally, economist at LPL Financial in Boston.

Manufacturing is leading the economy's recovery from the worst downturn in seven decades as businesses rebuild inventories, which had been liquidated to record levels to cope with subdued demand.

Durable goods inventories rose 0.3 percent, the biggest gain since December 2008, after rising 0.1 percent in January.

Orders were likely lifted by sturdy aircraft bookings, which offset another decline in orders for motor vehicles and parts. Non-defense aircraft orders rose 32.7 percent last month after a surging 134.9 percent in January. Vehicle orders fell 1.9 percent after a 2.3 percent drop the prior month.

Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health.

New durable goods orders excluding transportation rose 0.9 percent in February after falling 0.6 percent the previous month. Excluding defense, orders were up 1.6 percent after a 1.7 percent rise in January.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, rebounded 1.1 percent last month after a 3.9 percent fall in January. The increase was however below markets expectations for a 2.3 percent rise.

Shipments, which go into the calculation of gross domestic product, fell 0.6 percent in February after slipping 0.1 percent in January. Unfilled orders increased 0.4 percent, the largest gain since July 2008, after rising 0.2 percent in January.

(Reporting by Lucia Mutikani; additional reporting by Julie Haviv, Richard Leong and Chris Reese in New York; Editing by Andrea Ricci)