Sales of new homes unexpectedly rose in August to the second-highest level on record as higher mortgage rates failed to discourage buyers, government figures showed.

New single-family home sales rose 2.9% in the month, to 983,000 units at a seasonally adjusted annual rate, the Commerce Department said. Sales in July rose 0.8%, to a rate of 955,000, previously reported as a 980,000 rate. August's pace was exceeded only by November's record annual rate of 985,000.

Analysts said they expected a sales pace of 954,000 in August.

"People are still feeling good about their employment situation," Gary Thayer, chief economist at A.G. Edwards & Sons in St. Louis, said before the report was issued. "They still have confidence in the economy and their personal finances" and are not being influenced by higher mortgage rates.

New home sales rose in three regions and fell in the South.

In the Northeast new home sales surged 16.9%, to a rate of 104,000, the highest level since January 1997. In the Midwest they rose 15.2%, to a 197,000 rate, the highest since February 1998. In the West, they were up 10.3%, to a 268,000 rate. In the South, sales fell 8.2%, to a 414,000-unit annual rate.

The inventory of new homes for sale at the current sales pace fell to a 3.9-month supply in August, while the number of homes for sale rose to an annual rate of 313,000, the highest since December 1996.

The median price of new homes decreased 3.9% in August, to $150,800 -- the lowest since July 1998 -- from July's $157,000.

Sales of previously owned homes fell in August for the second straight month, declining 2.8%, to an annual rate of 5.25 million. That follows a 4.1% drop in July, to an annual rate of 5.40 million units, the National Association of Realtors said.

-- Bloomberg News

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