New homes sales rose a surprising 2.8% in July despite growing problems in the subprime mortgage sector and tightening credit standards.The U.S. Census Bureau reported that sales of new single-family homes rose from a seasonally adjusted annual rate of 846,000 in June to 870,000 in July. The July sales report shows "fairly good momentum" in housing demand, said Wachovia Corp. economic analysts Adam York. But "everything has changed so dramatically because of financial conditions," he said, that it does not shed much light on market conditions today. He noted some of the sales contracts signed in July will probably be canceled because the buyers can't get financing. "Sales are probably going to continue to decline through the end of this year and starts could decline well into next year," Mr. York said.

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