New-home sales defied expectations and stopped sliding during July, making a modest increase that gave the beleaguered housing market a little good news.

Meanwhile, demand surged for expensive goods during July in a broad-based increase that topped expectations by a wide margin and included a strong climb in a key barometer of capital spending by businesses.

Sales of single-family homes increased by 2.8% last month to a seasonally adjusted annual rate of 870,000, the Commerce Department said Friday. June new-home sales fell 4% to an annual rate to 846,000; originally, the government said June sales dropped by 6.6% to 834,000.

The median estimate of 23 economists surveyed by Dow Jones Newswires was a 1.4% decline in July sales to an 822,000 annual rate.

Year over year, new-home sales were 10.2% lower than the level in July 2006.

The sickly housing sector has pulled down U.S. economic growth for six straight quarters. Groundbreakings by home builders in July fell to the lowest level in 10 years. Analysts expect the slump to continue. Lenders are tightening standards for borrowers, which sent up mortgage rates during the summer. Inventories of homes are running high.

Friday's data showed the ratio of new houses for sale to houses sold slipped during July, falling to 7.5 from 7.7 in June. There were an estimated 533,000 homes for sale at the end of July, down from June's 538,000. The median price of a new home increased by 0.6% to $239,500 in July from $238,100 in July 2006. The average price decreased by 3.4% to $300,800 from $311,300 a year earlier. In June this year, the median price was $230,600 and the average was $304,900.

Regionally last month, new-home sales increased 22.4% in the West and 0.6% in the South. Demand plunged 24.3% in the Northeast and dropped 0.9% in the Midwest. An estimated 74,000 homes were actually sold in July, down from 77,000 in June, based on figures not seasonally adjusted.

Orders for Durable Goods Top Expectations

Orders for durable goods rose by 5.9% last month to a seasonally adjusted $230.7 billion, the Commerce Department said Friday. Durables, which are goods designed to last at least three years, rose 1.9% in June, revised from a previously estimated 1.3% advance.

The barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- increased by 2.2%, after dipping 0.1% in June. Analysts will monitor future data for any indications whether credit conditions are putting a chill on corporate capital spending plans. July shipments for nondefense capital goods excluding aircraft rose 0.5%, after slipping 0.8% in June; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.

Wall Street expected a much smaller increase in orders. The median estimate of 23 economists surveyed by Dow Jones Newswires had durables 1% higher in July. The 5.9% gain was the largest since 8.8% in September 2006.

Transportation orders in July increased 10.8%, after rising 9.2% in June. Demand for commercial planes rose 12.6%, after surging 37.1% in June. Military aircraft orders increased 15.8%. Motor vehicles and parts increased by 9.8% last month. Orders for all durables except transportation goods advanced 3.7% in July. Orders rose by 7.9% for primary metals, 7.4% for computers and electronics, 1.4% for fabricated metals, and 5.5% for machinery. Demand fell by 1.2% for electrical equipment. Demand ex-transportation had gone 1.2% lower in June.