Sales of new homes last month shot up to the highest levels in 14 years and prices declined by record percentages, a government report states.

Sales of new homes last month shot up to the highest levels in 14 years and prices declined by record percentages as homebuilders continue to cut prices to move an inventory of unsold homes that currently stands at over a half-year’s supply.

The government report released today said new single-family home sales rose 16% in April to annual rate of 981,000, the sharpest climb since 2002.

Sales in the South recorded the largest gain of 28%, with the West up 8% and the Northeast up 4%. Sales in the Midwest were down 4%.

However, the median sales price of a new home in April fell $28,500 to $229,100. That’s the biggest monthly drop on record and largest year-over-year drop since 1970.

The increase in sales did put a dent in unsold inventory. In March, the department said it would take homebuilders eight months to sell the industry’s stock of unsold new homes. Last month, the figure did fall for the first time this year, but still stood at six and a half months.

A closer look at the sales numbers also indicates that homebuilders may have to continue cutting prices and offering other incentives to move their properties. Sales in April were still down 11% compared to April 2006. For the first four months of this year, sales were 20% less than the same period of time last year.

Today’s data on new home sales represents only a small portion of the country’s home-buying demands. Tomorrow, the National Association of Realtors will report on the pace of existing home sales, which represents 85% of the housing market.