Sales of newly built, single-family homes rose 3.6% to a seasonally adjusted annual rate of 372,000 units in July from the previous month, according to the Department of Housing and Urban Development and the Census Bureau.

"Sales of new homes in July returned to the same solid pace they set in May, which was the fastest sales rate we'd seen in more than two years," Barry Rutenberg, chairman of the National Association of Home Builders, said. "This is further evidence that consumers are becoming more confident in local housing markets as they look to take advantage of today's very favorable prices and interest rates."

Existing home sales rose in July as well, pushing prices up for the fifth straight month, according to the National Association of Realtors. Sales of existing single-family homes, town homes and condos increased 2.3% to an annual rate of 4.47 million properties, more than 10% above the pace measured at the same point last year.

Regionally, the Northeast posted the biggest gain in new-home sales with a 76.5% increase in July from what the NAHB calls an abnormal low in June. The Midwest posted a 7.7% gain while the South and West registered marginal declines of 1.6% and .9%, respectively.

After trending downward for the past six years, the inventory of new homes for sale hit a record low of 142,000 units in July, creating a 4.6-month supply at the current sales pace.

NAHB Chief Economist David Crowe noted the general upward trend in home sales and expects it to continue throughout the year. But he also recognized “the fact that the inventory of new homes for sale reached an all-time low in July is a worrisome signal that ongoing, unnecessarily tight credit conditions are keeping builders from being able to replenish supplies as consumer demand improves."