New-home sales jump 5.7% in September

• September sales rate highest since April 2010
• 389,000 rate is up from 368,000 in August
• Sales are up 27% from a year ago

Sales of new homes surged in September, providing further evidence of the housing market's improving strength in a economic recovery in need of more muscle.

The nation's home builders sold houses at an annual rate of 389,000 in September, the government said Wednesday. That was up 5.7% from August and 27% more than last September. It was the highest level since April 2010 when a federal homebuyer tax credit boosted sales.

The figures add to the growing sense that the housing recovery is now solid, said Celia Chen, a housing economist at Moody's Analytics. Job gains, low mortgage rates and pent-up demand are driving sales, now that the economy is healing after the recession. Moody's expects new home sales to hit 372,000 this year and rise to 470,000 units in 2013.

``It's a good number,'' Chen said. ``Inventories of new homes stand near a record low, and the inventory of distressed homes available for sale is rapidly shrinking. These forces are causing home builders to put up new homes.''

The average price of a new home sold in September was $292,400, while the median price was $242,400, the government said. The median price is the price at which half of the homes sold were more expensive, and half were less expensive.

New-home sales are up 22% year-to-date, according to the government's report. They are up 40% in the western U.S. and 33% in the Northeast. Sales in the Midwest are up about 10%. Sales in the South, which account for more than half of the nationwide total, are up 15%, the government said.

Faster construction could spur economic growth and hiring. And it could also encourage more people to put their homes on the market.

Other reports have also pointed to momentum in housing.

In September, builders broke ground on single-family homes and apartments at the fastest pace in more than four years. And they requested the most building permits in four years, a sign that many are confident that the gains in home sales will endure.

The housing market is now 43% of the way back to normal, according to economist Jed Kolko at real-estate website Trulia.com.

New-home construction is 39% of the way back to a normal level from the post-recession low, Kolko said.

Existing home sales are at 57% of their long-term trend pace, and the drop in delinquencies and foreclosures means that the number of distressed properties has moved 34% of the way back to what Trulia considers a normal level.

``Construction is a long way from normal,'' Kolko said. ``Prior to the bubble we saw 800,000 to 900,000 a year. In the 1990s, it was about 600,000.''

The shrinking number of foreclosed homes for sale is helping drive demand for new houses, Kolko said.

``People who were looking for a deal (on a foreclosed home) are now looking at new houses,'' he said.

Though new homes represent only a small portion of the housing market, they have a disproportionate impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics from the National Association of Home Builders.

Contributing: The Associated Press