"This is shaping up to be the best year on record for home sales," said Kent Conine, president of the National Association of Home Builders (NAHB). "While June may have been the high-water mark , coinciding with the lowest mortgage rates in more than four decades that month, builders obviously continued to see lots of demand in July, including buyers who jumped off the fence as mortgage rates moved upward."

Regionally, the sales pattern was mixed last month, with the Northeast and West recording declines of nearly 21 percent and 16.3 percent, respectively. The Midwest posted a 17.3 percent gain, and the South posted a 1.1 percent gain. The inventory of new homes for sale in July was unchanged from June's 3.5-months supply at the current sales pace, according to the report.