It's still a rally.

Sacramento-area home sales surged past last year's levels for a fourth straight month in July as 4,126 buyers embraced falling prices and deals on foreclosed homes.

July escrow closings were the highest for a month since June 2006, property researcher DataQuick Information Systems reported Monday. The firm's statistics show 1,200 more sales in July than the same time last year.

It's not surprising, experts said Monday. Prices have fallen steeply, 30 percent or more in the past year. That's raised a tide of first-time buying by people with good jobs and good credit. Most are again using government-backed financing and 30-year fixed-rate loans, they said.

"I think 70 to 75 percent of houses are being purchased by first-time buyers," said Bob Bronswick, president and chief operating officer of Coldwell Banker Residential Brokerage's Sacramento-Tahoe region.

To some analysts, the region's rising sales – mirroring those elsewhere in inland California – suggested a path toward stability that could set in next year. In July, Southern California also posted its first year-over-year sales gains since September 2005, DataQuick reported Monday.

"I think we're now getting to a point where the prices that are out there are finding a market," said G.U. Krueger, economist at Institutional Housing Partners, an Irvine investor.

"I think in the Central Valley we're getting closer to the bottom. I still think it's going to be 2009," added Delores Conway, director of the Casden Forecast at the USC Lusk Center for Real Estate in Los Angeles. "But I think prices are bottoming out in Sacramento, the Inland Empire and some areas around Fresno."

Caution abounds, however. Much rides on unemployment, which is rising in California, availability of credit, resets on a new wave of troubled loans and the pending loss of down payment assistance gift programs, analysts said.

Still, July was the second month in a row for the eight-county region's sales to break the 4,000-unit mark, DataQuick reported. That's a feat the housing market hasn't accomplished in two years in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties.

Some highlights from DataQuick:

• Median sales prices of existing and new homes combined in Sacramento County fell to $210,000, the lowest since June 2002. The number of sales in the county was up 73 percent from last year – the highest since October 2005. Prices have now fallen 45.7 percent from their August 2005 highs. Median is where half cost more and half cost less.

• Placer County saw July sales rise 1 percent above the same time last year, its first year-over-year gain in at least a year. The county's median sales price of $345,000 was almost 20 percent below the same time last year.

• El Dorado County's median sales price rose slightly in July to $390,000. But that was 19 percent below the same time last year. Sales were flat compared with July 2007.

• Yolo County saw sales rise 18 percent above the same month last year. Its median price of $293,000 was down 27.3 percent from July 2007.

• Yuba County saw sales climb 43.3 percent above July 2007. Its $183,500 median price was down 33 percent from the same time last year.

• Sutter County sales rose nearly 26 percent from last year. Prices were down 30 percent at $203,000.

Only Amador and Nevada counties saw fewer sales in July than the same month in 2007, DataQuick reported.

Banks in July continued their reign as the capital region's top sellers. Their foreclosed properties accounted for 70 percent of closings in Sacramento County alone, according to the Sacramento Association of Realtors.

"Banks have been extremely aggressive in their pricing," said Bronswick. He said their repo pricing has helped the region burn through its for-sale inventory at a "good rate."

The number of for-sale signs in the region fell in July to an 18-month low, at 11,644, according to the Sacramento research firm TrendGraphix. Industry experts called that decline a favorable trend, given that foreclosures continued to rise in the capital region.

"Even if foreclosures are rising, the builders have stopped building," said USC's Conway. "We're approaching an equilibrium. A number of different indicators are moving together."

Builders, indeed, have seen sales move in the opposite direction in the past year – down steeply – as buyers favor discounted bank repos. Monday, the National Home Builders/Wells Fargo housing market index – a gauge of confidence in the market – remained at an all-time low.

Call The Bee's Jim Wasserman, (916) 321-1102. Read his blog on real estate, Home Front, at www.sacbee.com/blogs.