The strongest performance in 2-1/2 years together with sharp upward revisions to prior months repositions new homes as a new force in the US economy. Sales in July jumped nearly 11 percent on the month to a much higher-than-expected 739,000 annualized rate at the same time that the three prior months were revised up by a net 102,000.

Supply on the market, at 7.5 months at July's sales rate, is down from 8.4 in the two prior months and is at its lowest since July last year. This will raise spirits among home builders and will be lifting forecasts for housing starts and permits.

The median price of a new home jumped to $429,800, up 3.1 percent on the month on top of June's 2.1 percent increase. Distribution is increasingly centered in the under $300,000 bracket, at 18 percent of total sales which is high for this reading and underscores affordability issues for many buyers.

The ongoing downturn in mortgage rates against the backdrop of a healthy labor market offer an increasingly favorable mix for a housing-sector recovery. And leading this recovery is the new home side of the market as the resale side, where prices are high and supply low, continues to lag.

Today's results lift Econoday's Relative Performance Index from the neutral zone to the positive zone, at plus 13 to now indicate that recent US data, on net, are coming in just ahead of Econoday's consensus estimates.

New home sales in July are expected to rise from June's annual rate of 617,000 to 628,000. Sales have substantially missed Econoday's consensus the last three reports, coming in below the consensus range in each report.

New home sales measure the number of newly constructed homes with a committed sale during the month. The level of new home sales indicates housing market trends and, in turn, economic momentum and consumer purchases of furniture and appliances.

This provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as new home sales, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once the home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, new home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the new home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.