Economic Watch: New Home Sales Highest Since 2008

UPDATED -- Sales of new homes in the U.S. hit a six-month high last month while the improvement for August was cut dramatically, according to a new U.S. Commerce Department report.

Sales in September increased 0.2% from the month before, hitting an annual rate of 467,000 homes, the best pace since July 2008. Compared to September 2013, sales are 17%, and they are up 1.7% in the first nine months of the year versus last year.

The annual rate in August was revised downward from 504,000 home sold to 466,000, still 15.3% higher than the month before.

Sales in the Midwest increased the most of any region from August to September, up 12.3%. Month over month numbers were up 2% in the South, while things were relatively flat in the Northeast. New home sales in the West fell 8.9% following an August surge of around 28%.

"The supposed momentum in sales seen in August was severely deflated after revisions, with September's minimal rise suggesting limited activity in the housing market at the end of third quarter, said Chief Economist Lindsey Piegza with the investment firm Sterne Agee.  "The story remains unchanged - consumers, strapped with debt and minimal savings, are struggling to afford large purchases without significant income growth. Despite record low rates keeping housing affordability relatively high, new demand, particularly among the youngest generations, remains restrained."

The report follows one a few days earlier from the National Association of Realtors showing existing home sales in the U.S. bounced back in September, hitting their highest annual rate in a year.

Update adds analyst comments.