Sales of existing homes surged 7.8% in August to the best level in more than a year as low interest rates and a slowly improving jobs market help fuel a rebound in activity.

The National Association of Realtors said sales rose to a seasonally adjusted annual rate of 4.82 million from July’s 4.47 million, which was better than the 4.6 million expected in a MarketWatch-compiled economist poll.

The level was the highest since May 2010 and the percentage gain was strongest since August 2011. U.S. stocks saw a quick spike after the data was released, and have moved in a see-saw manner ever since.

Compared to the same period of 2011, sales were up 9.3%, the 14th straight month of year-on-year gains.

Each of the four major regions saw monthly gains in the order of 7% to 8%.

About a third of homes were sold in a month and the median time it took to sell a house was 70 days, up slightly from 69 days in July but down from 92 days at the same time last year.

Fueled by low interest rates and pent-up demand, home sales have improved considerably from their recession-era lows, but still are well below the 2005 peak of just over 7 million.

“The housing market is recovering with a greater strength,” said Lawrence Yun, chief economist at the NAR. “Home sales [in 2012] will be at a five-year high, home prices will be at a four-year high, we are clearly coming up from the bottom.”

Realtors have complained the recovery would be even stronger were it not for the tougher underwriting standards banks have implemented since the bursting of the housing bubble, data confirmed by federal banking regulators earlier this week showing higher median FICO scores.

Yun also noted the negative impact from underwater homeowners as well as concerns about impending regulations about so-called “qualified” mortgages.

The NAR data is consistent with other indicators showing strength in the housing market. The Commerce Department earlier Wednesday said housing starts edged up 2% in August — and permits of single-family homes were the strongest since March 2010.

And a measure of builder sentiment in September reached a six-year high.

The median existing home price gained 9.5% year-on-year to $187,400, which reflects both the change in the mix of homes but also price gains on similar property. Sales of homes below $100,000 fell 5% year-on-year — the only price category seeing a decrease.

That’s because distressed sales represented 22% of transactions, the lowest since Oct. 2008 when the data first was tracked. The NAR forecasts next year distressed sales will represent just 10% to 15% of transactions. Foreclosures accounted for 12% of sales and short sales were 10%.

Inventories rose 2.9% to 2.47 million in August, and represent 6.1 months of supply at current sales rate, the lowest since January. Yun said Phoenix, Las Vegas and Riverside in particular are having inventory issues that are limiting activity in the West — over the last three months, sales have gained just 3.5% there, compared to the 18.5% gain nationally.

All-cash transactions represented 27%, unchanged from July but still high compared to historic levels. First-time buyers represented 31% of transactions, still below 40% to 45% normal rate.

Investors represented 18% of all transactions, up from 16% in July.

Steve Goldstein is MarketWatch's Washington bureau chief.