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New home sales figures released today by the Commerce Department surprised economists by rising at their highest rate in more than seven years. The increase came as a result of lower interest rates and continued high consumer confidence. July new home sales were up 14.7 percent to a seasonally adjusted 944,000 annual rate, the highest sales rate since March. Analysts had expected an increase of only 0.7 percent. July's sharp rise followed June's downwardly revised 7.1-percent drop and an annualized rate of 823,000.
In another sign of the resurgence in the new housing market, the month's supply of single-family homes fell to 3.8 from June's 4.6 months, its lowest level since December 1998. The housing sector was expected to be one of the first to feel the effects of the six rate increases by the Fed since last June, and though the market had recently slowed, this resurgence may cause the Fed to reconsider the effects of its rate hikes when it meets next on October 3.