New single-family home sales in December rose to their highest level in eight months and prices were the highest since April 2008, raising cautious optimism for a housing market recovery.

The Commerce Department said sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November. Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate. Compared to December a year earlier, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a 321,000-unit rate.

Economists saw the gains as significant.

Clearly we are seeing stabilization in new home sales and this data suggests some upward momentum that we have seen in existing home sales. What is important to realize is even in a period of softer new home sales, inventory continues to decline, said Dean Maki, chief U.S.. economist with Barclays Capital in New York.

The level of inventory is at its lowest since the 1960s, Maki said. This suggests the big declines in housing starts are now behind us and housing starts should be on a gradual trend in 2011.

Brian Bethune, an economist with HIS Global Insight in Lexington, Mass added: It's meaningful to the extent that there is a pattern of numbers showing increases. It's a sign that there is a turnaround. Things are definitely perking up, but there is a question whether it's sustainable.

Source: New Home Sales Surge in December, Reuters(Jan. 26, 2011)