It’s no secret that the current economic woes of this country (and much of the world) can be traced to the U.S. housing market – which is why updates about home sales are watched so closely by those looking for indicators about where the economy is headed.

The Department of Commerce recently announced that sales of residential buildings increased by a healthy 11% in June, a figure well above the 2.3% widely predicted.

Here are some hard facts:

• New home sales in June increased 11% from May.
• The month-to-month jump was the largest recorded in the past nine years.
• Compared to June of 2008, sales fell 21.3%.
• The South was the only region of the country in which home sales decreased (by 5%).
• Existing home sales increased 3.6% in June, marking a third consecutive month of increases.

Tax Incentive Enticing Buyers

Analysts have suggested that the jumps can likely be attributed to a combination of low prices and interest rates and the one-time $8,000 tax credit available to first-time buyers who purchase before November of this year.

Home production has greatly slowed since the boom months and the number of new homes currently on the market is at its lowest level since 1998, according to sources.

Despite these figures, the market still has more than eight months’ worth of houses (if buying continues at its current rate).

That’s higher than the “ideal” six-month supply, but an improvement over May’s 10.2 months’ worth.

Competition Steep for New Homes

Sources indicate that part of the problem facing new home sales is the bargains available from foreclosure properties, short sales and sales of existing homes that have been on the market a while.

Put another way, even though last month’s numbers beat many expectations, a normal (not boom) year typically sees three times as many new home sales.