New-home sales in July jumped to the highest level in nearly a decade, with sales of new single-family homes climbing 12.4 percent month-over-month and reaching a seasonally adjusted annual rate of 654,000, the Commerce Department reported Tuesday. That marks the highest level since October 2007.

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Low mortgage rates, improving income growth, and steady job creation have helped propel home buying for both new and existing homes. New-home sales have posted strong gains since the beginning of this year, up 13.3 percent compared to a year ago. In June, sales of existing homes also reached their strongest pace in nearly a decade, though they slipped in July, according to the National Association of REALTORS®.

"July's positive report shows there is a need for new single-family homes, buoyed by increased household formation, job gains, and attractive mortgage rates," says Robert Dietz, chief economist for the National Association of Home Builders. "The uptick in demand should translate into increased housing production throughout 2016 and into next year."

Still, while new-home sales have posted strong gains, they remain far below the peak set in July 2005 of 1.39 million. In fact, July is the first month since early 2008 that new-home sales have climbed above the 600,000 mark. The median sales price of a new home last month was $294,600, down from $296,000 a year earlier.

The Commerce Department also showed a 4.3-month supply of new homes available by the end of July, which is the fewest number of homes for sale in three years.

By region, new-home sales rose by the highest percentage in the Northeast, up 40 percent month-over-month. They also were up 18.1 percent in the South and 1.2 percent in the Midwest. In the West, sales remained unchanged in July.

Source: National Association of Home Builders and “U.S. New Home Sales Rise to Highest Level Since 2007,” The Wall Street Journal (Aug. 23, 2016)