Home Sales Show Surprise Rise

New-home sales in July fell sharply from a year earlier, but they unexpectedly rose 2.8% from June, as contracts in the Western region of the U.S. spiked.

The U.S. Census Bureau said new-home sales reached an annual rate of 870,000 units in July, down 10.2% from a year earlier. Economists expected a rate of 825,000 home sales, according to estimates from Reuters.

The Census Bureau also revised the June sales number upward to an annual level of 846,000 units, compared with the previous estimate of 834,000.

Sales in July rose 22.4% from June in the West, but tumbled 24.3% in the Northeast. Sales were roughly flat in the Midwest and South.

"Certainly a positive number, but the big caveat to any numbers we are getting right now is that they are pre-credit-crunch data, so we can only put so much value in them," says Adam York, an economic analyst with Wachovia.

York also points out that the new-home sales data represents contract signings and not closings, which means that cancellations aren't taken into account. As mortgage financing became tougher in August, "this could increase the cancellation rate for builders going forward," York says.

Inventory fell nearly 1% from June to July, with 533,000 homes for sale at the end of the month. That number represents 7.5 months of supply at the current sales pace, down from 7.7 months in June.

The median sales price of a new home rose to $239,500 in July from $230,600 in June.

Homebuilder stocks barely reacted to the data. Centex(CTX Quote) rose 36 cents to $32.20, while Toll Brothers(TOL Quote) fell 4 cents to $22.61. Lennar (LEN Quote) was up 42 cents to $30.41.