The U.S. housing market showed further signs of improvement as latest figures pointed to rising home sales and stabilizing prices, which increased the likelihood of a sustained recovery more than five years after the bubble burst.

The U.S. Commerce Department said on Thursday that sales of new single-family houses in July rose to a seasonally adjusted annual rate of 372,000 units, up 3.6 percent from June and 25.3 percent from a year ago.

The level was the same as in May, the highest in more than two years, but remained far below the 700,000 annual rate that economists deem for a healthy market.

A separate report released by the Federal Housing Finance Agency (FHFA) showed that home prices rose 1.8 percent in April- June quarter from the first quarter, the biggest quarterly jump since the fourth quarter of 2005.

In June, house prices edged up 0.7 percent from the previous month, the FHFA reported.

"Although some housing markets are still facing significant challenges, house prices were quite strong in most areas in the second quarter," said FHFA Principal Economist Andrew Leventis.

"The strong appreciation may partially reflect fewer homes sold in distress, but declining mortgage rates and a modest supply of homes available for sale likely account for most of the price increase."

Meanwhile, existing home sales, which account for a larger part of the housing market, also improved in July with prices continuing to rise.

The National Association of Realtors (NAR) said on Wednesday sales of previously owned homes increased 2.3 percent in July from June to an annual rate of 4.47 million units, more than 10 percent higher than a year ago.

The median existing home price for all housing types climbed 9. 4 percent from a year ago to 187,300 U.S. dollars in July, marking the fifth consecutive month of year-on-year increase.

Distressed homes -- foreclosures and short sales sold at deep discounts -- accounted for 24 percent of July sales, down from 25 percent in June and 29 percent in July 2011.

"Mortgage interest rates have been at record lows this year while rents have been rising at faster rate. Combined, these factors are helping to unleash a pent-up demand," said Lawrence Yun, NAR chief economist.

Furthermore, home builders grew more confident in the housing recovery in August. The National Association of Home Builder/Wells Fargo builder sentiment index rose two points to the highest level since February 2007, indicating an improving outlook for housing construction.

Still, the housing market has a long way to go to get a full recovery. According to minutes of the most recent policy meeting of the Federal Reserve, top central bank officials noted conditions in the housing sector appeared to have improved somewhat, but from a very low level.

Analysts said although record-low mortgage rates have made home buying more affordable due to tight credit standards, many people are still having difficulty qualifying for home loans. Weak job market and stagnant wages would also dampen home buyers' confidence.