By Jason Lange
WASHINGTON -- Sales of new single-family homes in America rose in August but held near their lowest levels this year, a sign that a sharp rise in interest rates is weighing on the U.S. economy.
Sales rose 7.9 percent to an annual rate of 421,000 units, the Commerce Department said Wednesday.
The pace of sales was in line with analyst expectations and supported the view that rising mortgage rates were taking steam out of America's housing recovery.
August's increase in new home sales didn't make up for the steep drop registered in July, when the pace of sales was the weakest since October.
Mortgage rates surged beginning in May when the Federal Reserve gave signals it was thinking of winding down a bond-buying stimulus program. The Fed surprised financial markets last week when it said it would put off reducing monthly bond purchases for now. Policymakers said rising borrowing costs played a role in their decision.
%VIRTUAL-article-sponsoredlinks%The housing market, which has been a major drag on America's economy since the 2007-09 recession, appeared to turn a corner early last year when home prices began to rise.
Last month, the median price for a new home sale fell to $254,600. The median sales price, which is not adjusted for seasonal swings, has fallen every month since May, although is still up slightly from August 2012.
The inventory of new homes for sale increased by 3.6 percent in August from July, leaving the stock of unsold new homes at its highest level since March 2011.
By Jason Lange