The morning began with positive news for the housing market. Sales of new single-family homes shot up 11% in June ― the biggest one-month jump in eight years ― bringing the annual pace of sales to 384,000, well above the market consensus of just 350,000. 

“This report along with recent data on housing starts and existing home sales tells us the housing sector is finally in recovery mode,” said Joseph LaVorgna, chief US economist at Deutsche Bank.

In addition, inventory overhang dropped for the third straight month, falling to an 8.8-months’ supply ― the lowest level since October 2007. In May, overhang was 10.2 months, and the peak was a 12.4-month’ supply in January.

The raw number of new homes for sale is 281k, the lowest level since 1993, and compared with 436k in June 2008.

“This will go a long way to eventually helping to stabilize the economy in the second half of this year and to provide us with much better overall economic growth prospects next year,” LaVorgna added.

Historically, the pace of sales is still low, as new home sales are struggling with more competitive prices from existing home sales. Since June 2008, the annual rate of sales has fallen 21.3%, but many economists are confident that the housing market hit bottom in January.

Normalization wasn’t seen in prices, however. The median price for a new home was $206,200, 12% lower than one year ago, and a pretty hefty drop from May’s median of $219,000.

Of course, it was those falling prices, in combination with historically low mortgage rates, that spurred the month’s surge in demand. 

“New homes continue to fight for the attention of potential buyers, who are torn between the purchase of a new home, and the stock of an existing home or a cheap foreclosed home,” said Jennifer Lee from BMO Capital Markets. 

“But homebuilders' confidence is generally strengthening, particularly with their expectations of how the market will play out over the next six months or so, which suggests the bottom in the housing market has been reached,” she added.

In terms of GDP, analysts from RDQ noted that the decline in housing construction dragged down total output by 1.4% in Q1, but looking ahead “it appears that this drag is on track to disappear in the second half of 2009, which will help stabilize the macro economy.”

The first official estimate of Q2 GDP will be released Friday.