Sales of new U.S. homes climbed 3.5 percent in August, snapping a two-month decline as buying surged in the pricey Northeast and West housing markets.

The Commerce Department said Wednesday that newly built homes sold at a seasonally adjusted annual rate of 629,000 last month. The pace of sales were revised downward for July and June. Sales of new homes have advanced 6.9 percent this year. Still, rising costs and higher mortgage rates have tempered some of the enthusiasm from would-be buyers.

“Demand has cooled as home prices reached levels that have caused some prospective buyers to balk, while homebuilders seem to be finally making a little headway in supplying the market adequately,” said Stephen Stanley, chief economist at Amherst Pierpont Securities.

For the past several years, home prices have consistently increased at a significantly faster clip than incomes. Historically low mortgage rates had helped to ease the mounting costs of purchasing a home, but mortgage rates have been on the rise for the past year.

The shortage of existing homes on the market has driven demand for new construction. That has led to steady growth in new home sales this year, even as sales of existing homes has declined 1.5 percent, according to the National Realtors Association.

“Through the volatility, new home sales data continue to show more strength than the existing home sales data, but there appears to have been some loss of momentum in recent months,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, a research consulting firm.

Last month’s sales gains for new homes mostly came from a 47.8 percent jump in the Northeast and a 9.1 percent increase in the West. New-home sales edged up in the Midwest and fell in the South. The regional figures can be extremely volatile on a monthly basis.

The average sales price has risen 5.2 percent from a year ago to $388,400.

(AP)