WASHINGTON — Sales of new homes recorded an unexpected increase in September as median home prices dropped to the lowest level in four years, the Commerce Department reported Monday.

Sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes, Commerce said. Economists had expected sales would drop from the August level.

The median price of a new home sold in September declined by 9.1 percent from a year ago to $218,400, the lowest price level since September 2004, a period when home prices were rising rapidly as the country experienced a five-year housing boom.

The surprising increase in September sales still left them 33.1 percent below the level of a year ago as the country is battered by the worst slump in housing in decades.

The report on a rise in new home sales followed news last week that sales of existing homes rose in September by 5.5 percent, the largest monthly gain in more than five years.

Analysts are not convinced that the sales increases are signaling a bottom for the housing market. They note that the September gains came before the latest upheavals in financial markets which have raised new worries about the overall state of the economy.

Many analysts believe the country has already entered a recession. They are forecasting significant increases in job losses which will make it even harder to mount a sustained rebound in housing.

New home sales fell by 21.4 percent in the Northeast and were down 5.8 percent in the Midwest. However, sales rose by a sharp 22.7 percent in the West, a region of the country which has seen some of the biggest declines in prices, a development which has spurred sales. Sales were up 0.7 percent in the South.

The rise in sales left a total of 394,000 unsold new homes on the market at the end of September, down a record 25.4 percent from the number of unsold homes on the market at the end of September 2007.

Builders have been sharply cutting back on production, trying to get inventories more in line with sales.

Even with the latest drop in total unsold new homes, the inventory represents a 10.4 months supply at the September sales pace, still a historically high level.

The inventory of unsold existing homes is also remaining near historic highs as that market is being increased by a record wave of home foreclosures.

The 2.7 percent rise in sales for September new home sales followed a big 12.6 percent drop in August, which was revised sharply lower from the government's initial estimate. Sales in July had risen by 3.6 percent.

Source: Associated Press October 28, 2008.