New U.S. single-family home sales fell in January, but an upward revision to the prior months' data and a drop in the supply of properties on the market added to growing signs of a budding recovery in the housing sector.

The Commerce Department said on Friday sales slipped 0.9 percent to a seasonally adjusted 321,000-unit annual rate. December's sales pace was revised up to 324,000 units, the highest in a year, from the previously reported 307,000 units.

October and November sales also were revised higher. Although sales fell last month, they were higher than economists' expectations for a 315,000-unit rate. Compared to January last year, new home sales were up 3.5 percent.

Despite the weak sales last month, details of the report offered further fresh signs of green shoots in the housing market, with the months' supply of homes on the market falling to 5.6 months - the lowest since January 2006.

That compared to 5.7 months in December. A 6-month supply is generally considered ideal.

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

Demand for housing could get a boost from the strengthening economy, especially the labour market, which is helping to lift confidence among Americans.

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Graphic on January U.S. new home sales: http://link.reuters.com/rar76s

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The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment edged up to 75.3 in February, the highest in a year, from 75.0 in January.

The median price for a new home rose 0.3 percent to $217,100 (136,790 pounds), the highest level since October. Compared to January last year, the median price was down 9.6 percent. The inventory of new homes on the market was the lowest on record.

The market for new homes faces stiff competition from previously owned homes, many of which are selling at a huge discount because of foreclosures.

But economists say house prices may be close to a bottom, citing recent declines in the supply of unsold previously owned homes and the homeowner vacancy rate.

The months' supply of previously owned homes on the market fell to a near 6-year low of 6.1 months in January.

The homeowner vacancy rate, which is closely correlated to the month's supply, fell to 2.3 percent in the fourth quarter of 2011 from 2.4 percent in the prior three months. The rate peaked in 2008.

While still elevated, their current levels are again consistent with stable or even slightly rising house prices, said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. This, in turn, would imply that one important drag on the economy will cease to exist.

Data this week showed home resales rose to a 1-1/2 year-high in January. Confidence among homebuilders this month approached a five-year high and builders are undertaking more residential projects, mirroring the economy's generally upbeat tone.

Still, both sales and home construction remain far below their 2005 levels.

The Federal Reserve has suggested a number of ways other policymakers could step in to help the beaten-up market and is considering purchasing more mortgage-backed securities to drive mortgages rates even lower.

New home sales last month rose in two of the four regions, but fell sharply in the Midwest and the West.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)