New U.S. single-family home sales in December rose faster than expected to their highest level in eight months and prices were the highest since April 2008, raising cautious optimism for a housing market recovery

The Commerce Department said sales jumped 17.5 percent to a seasonally adjusted 329,000 unit annual rate after a downwardly revised 280,000-unit pace in November.

Economists polled by Reuters had forecast new home sales rising to a 300,000-unit pace in December from a previously reported 290,000 unit rate.

Compared to December last year, sales were down 7.6 percent. Overall 2010 sales dropped 14.4 percent to a record 321,000-unit rate.

Data last week showed a surge in sales of previously owned home in December, but progress could be frustrated by a glut of homes from an unrelenting wave of foreclosures. The housing market has remained on the margins even as the broader economy shows signs of gaining strength and broadening out.

At December's home sales pace, the supply of new homes on the market to 6.9 months' worth, the lowest since April, from 8.4 months' worth in November. There were 190,000 new homes available for sale in December, the lowest in 43 years.

The median sales price for a new home increased 12.1 percent last month from November to $241,500, the highest since April 2008. Compared with December last year, the median price 8.5 percent, the biggest increase since August.

(Reporting by Lucia Mutikani, Editing by Neil Stempleman)

U.S.