The Commerce Department said Thursday that sales of new single-family homes increased 2.1% to a seasonally adjusted annual rate of 1.222 million. August sales fell 11.6% to a revised annual rate of 1.197 million from the earlier estimated 1.237 million. July sales were revised down to show a 4.3% increase to an annual rate of 1.354 million from 1.373 million.

Recent housing market indicators have yet to show sustained cooling of the red-hot activity in recent years. Existing-home sales were reported unchanged in September at nearly record-high levels, and housing construction staged a surprising rebound during the month.

Despite the Federal Reserve's continued campaign of gradual hikes in its short-term interest rates since the summer of 2004, the average rate on a 30-year fixed mortgage has remained near historic lows, averaging 5.77% last month, down from 5.82% in August, according to Freddie Mac. However, rates have edged above 6% in recent weeks, and a report from the Mortgage Bankers Association showed Wednesday that the level of mortgage applications for purchase declined 7.4% last week.

Fed Vice Chairman Roger Ferguson said in a speech last week that the ongoing rise in home prices may be "unsustainable," as prices have risen to levels that in some parts of the country seem high relative to the economic fundamentals. "I do not think that a significant and widespread drop in home prices is the most likely outcome, but the situation will require careful monitoring in the months ahead," Mr. Ferguson said.

Increased new-home sales in the Midwest and South outweighed declining sales rates in the Northeast and Midwest. Sales rates rose 24.9% in the Midwest and 5.6% in the South. But they fell 20.0% in the Northeast and 11.8% in the West. In an earlier notice, Commerce had said Hurricane Katrina would have a "minimal" effect on its national and regional estimates of new home sales. Most of the areas hit hardest by the hurricane aren't in the survey sample used to estimate new home sales, it said.

The average price of a home fell to $285,700 in September from a revised $287,500 in August. The median price was $215,700 last month, down from the revised $228,800 in August.

There were an estimated record-high 493,000 homes for sale at the end of September, representing a 4.9 months' supply at the current sales rate. In August, an estimated 478,000 were for sale, a 4.9 months' inventory. An estimated 97,000 homes were actually sold in September, down from 103,000 in August, based on figures not seasonally adjusted.