New home sales increased for the fifth straight month in August, a Commerce Department report said Wednesday. Sales of newly constructed homes rose 0.7 percent last month to a seasonally-adjusted annual rate of 429,000. That was an increase from a downwardly-revised reading of 426,000 in July.

Compared to August last year’s sales, new home sales were down 3.4 percent when the estimate stood at a 444,000 annual rate.

The estimated seasonally-adjusted inventory of new home at the end of August was 262,000, which represents a 7.3-month supply at the current sales rate.

In recent months, low mortgage rates have helped attracted buyers into the market. Though rates have rebounded slightly to 5.36 percent for a 30-year fixed mortgage, levels are still well below last year's rates, which stood at 6.32 percent in August 2008.

The housing market has also seen a boost from an $8,000 tax credit for qualified first-time home buyers. That credit is currently slated to expire December 1.

Sales of new homes in the West increased 12.1 percent to 120,000 homes, from 107,000 in July.

Activity in the South stayed flat at 224,000 units.

In the Northeast, new home sales dropped 16.3 percent to 36,000, from 43,000 in July. Midwestern sales also fell, by 5.8% to 49,000.

The median sales price of new homes fell significantly, to $195,200, from a revised $215,600 in July. The average price dropped to $256,800 in August from $273,100.