Sales of new homes increased about eight percent in August, partially shaking off a decline in July that wiped out most of the gains made in the first half of the year. New home prices increased 0.6 percent, and the supply of new homes on the market increased to the highest level since March 2011.

Purchases of new U.S. homes rose 7.9 percent in August, remaining below the average reached in the first half of the year and lending credence to theories that a recent two-year high in mortgage rates is chilling the real estate rebound.

Sales increased to a 421,000-unit seasonally adjusted annual pace, following a double-digit plunge in July that was revised downward to a 390,000-unit rate, according to a September 25 report from the Commerce Department showed today in Washington. Both July and August fell short of an average 446,000-unit rate in the first six months of 2013.

The median sales price for a new home increased 0.6 percent from August 2012, to reach $254,600, and purchases rose in three of four U.S. regions, led by a 19.6 percent jump in the Midwest. Sales dropped 14.6 percent in the West to an 82,000 annualized pace, the weakest since March 2012.

The supply of homes at the current sales rate fell to 5 months from 5.2 months in the prior month. There were 175,000 new houses on the market at the end of August, the most since March 2011.

Newly constructed houses accounted for about seven percent of the residential market in 2012, with re-sales accounting for the rest.