Great news for economy: New home sales surge 9.6% in July

— -- New-home sales rose nearly 10% in July, according to a government report Wednesday that bolstered signs of an improving housing market.

Sales of new homes climbed to a seasonally adjusted annual rate of 433,000, the highest pace since last September, the government said.

That was a 9.6% increase over the revised rate for June — better than industry analysts had expected, but still 13.4% below the July 2008 rate.

The sales rate has risen 31.6% from this year's lowest rate, which was set in January.

The seasonally adjusted estimate of new houses for sale at the end of July was 271,000, according to the government.

That represents a supply of 7.5 months at the current sales rate, the lowest figure since April 2007 and well below January's supply of 12 months.

"It's really good news. Inventory is down; sales are up," says Patrick Newport, with IHS Global Insight.

The question, Newport says, is how much of a lift sales are getting from a federal tax credit of up to $8,000 for first-time home buyers. It expires Nov. 30.

The government's report on new home sales follows Tuesday's S&P/Case-Shiller Index report showing improving home prices in June compared with May in 18 of 20 cities tracked.

According to the government, the median sales price of new houses sold in July was $210,100.

"I'm optimistic," says Tim Dwyer, CEO of Entitle Direct Group, a title insurer in Stamford, Conn. "What was needed was a bottoming. Then consumers would start to look left and right and start jumping. I believe that's what's happening here."

In the Northeast, July's sales rate rose 32.4% compared with June, the strongest gain of any region. The South was up 16.2%; the West was up 1%; and the Midwest's sales rate fell 7.6%.

Joel Naroff, of Naroff Economic Advisors, said the rise in existing home sales is a tangible sign that the housing market is now back up and running.

That's in part because builders are being more cautious about pursuing developments until they are certain they can sell their properties, he said.