Purchases of new homes jumped more than forecast in July, adding to signs that the market is rebounding.

Sales rose 9.6%, the most since February 2005, to a 433,000 annual pace, the Commerce Department said Wednesday.

"We're seeing a clear pickup in housing activity," said Michael Moran, the chief economist at Daiwa Securities America Inc. in New York. "The correction phase is essentially over, and we expect continued improvement, though not a vigorous pickup."

Economists had forecast that new-home sales would rise to a 390,000 rate. Last month's pace was the highest in 10 months.

The median price of a new home fell 11%, to $210,100, from $237,300 in July 2008. Sales of new homes were down 13% from a year earlier.

Builders had 271,000 houses on the market last month, down 35% from July 2008. It would take 7.5 months to sell all the homes in inventory at the current sales pace, the shortest time since April 2007.

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