New Home Sales Surge to 2-Year High in September

The latest in a slew of good housing market numbers, new home sales are showing strength.

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Sales of newly built single-family homes surged to their highest level in almost 2½ years last month, yet more evidence that increasing strength in the construction sector could help boost the struggling economy.

According to a Commerce Department report released Wednesday, new home sales jumped almost 6 percent to a seasonally adjusted annual rate of 389,000, the highest level since April 2010 when the homebuyer tax credit buoyed sales.

[READ: Is Housing Better Off Than it Was 4 Years Ago?]

Although sales still remain below levels economists consider healthy, purchases of new homes rose more than 27 percent over the past year, marking the strongest yearly gain in new home sales since February.

Wednesday's report, which comes on the heels of other encouraging news on the housing front, adds further credence to the notion that the housing market recovery has teeth. While new homes are just a small portion of the housing market, they have a disproportionate effect on the economy. According to the National Association of Home Builders, each new home built creates an average of three jobs for a year and generates about $90,000 in tax revenue.

Home prices have also continued to inch up during the past year. Rising prices could give would-be sellers more incentive to put their homes on the market, easing the inventory issues that have been limiting home sales.

All these factors put fuel in boilers driving the economy, experts say, and could encourage more housing demand, more hiring, and broader economic growth. Nevertheless, many obstacles still confront the housing recovery. Many Americans looking to buy homes given record affordability still can't qualify for mortgages or afford the heftier down payments more banks are requiring to finance a home purchase.

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  • Meg Handley is a reporter for U.S. News & World Report. You can reach her at and follow her on Twitter at @mmhandley.