Sales of new Valley homes inched upward in July, though builders continued to battle an oversupply of unsold houses, stricter lending standards and low consumer confidence.

Some 3,128 new homes were sold last month, up 4.7 percent from June, according to the latest Phoenix Housing Market Letter by analyst RL Brown.

Overall, there were nearly 8,600 new and existing Valley houses sold in July, Brown said.

That’s not even close to the heights of 2005, but it is “a huge amount of sales for housing in a month,” he said.

Today’s market is similar to the early 2000s before the boom, and builders and sellers weren’t complaining then, Brown said.

“My gut feeling is that we have more rocks in the road,” but the basic elements of a successful market still exist in the Valley — good job and population growth,” he said.

July new homes sales were still down 14.5 percent from the same month last year, however. And sales for the first seven months of the year totaled 22,565, a 20.9 percent drop from the same period in 2006.

Building permits for new homes were also down in July. Developers took out some 2,560 permits, compared with 3,490 in June and 3,601 in July 2006, Brown’s report shows.

Meanwhile, the median new home price — where half cost more and half cost less — hovered around $257,000.

The existing home market continues to be the biggest hurdle facing builders.

Cancellations are down from last year, but developers continue to suffer, as potential new home buyers can’t sell their old homes, said John Fioramonti, managing director of real estate research firm Hanley Wood’s local office.

But if buyers are hanging back and waiting to see prices plunge farther, they shouldn’t hold their breath.

Prices won’t likely fall much more because builders have already slashed them tremendously, Fioramonti said.

“I don’t know how they can make any kind of money at all on the pricing that they’ve done,” he said.

If there is a bright point in the current market, it seems to be the demand for higher-density housing, Fioramonti said.

Single-family detached homes are selling at a rate of three to five a month in most subdivisions, while higher-density projects are seeing sales in the six to nine range, he said.

National company D.R. Horton has found particular success with their urban living division, which is building projects throughout the Valley, Fioramonti said. Centex Homes, another major national player, is also jumping on the high-density track.

“That’s pretty much what some of the bigger guys like D.R. Horton and KB Home (are doing),” he said. “That’s all they’re focusing on right now.”