New home sales blew past expectations in August, hitting the fastest pace in more than three years.

Sales of new single-family homes rose 20.5 percent to a seasonally adjusted annual rate of 800,000 units last month, government estimates showed Wednesday. The August rate was up 15 percent from the year prior and the highest level since January 2022.

The gain was surprising, given that elevated mortgage rates and high prices have kept many potential buyers on the sidelines. Economists surveyed by Reuters had projected a slowdown to 650,000 units.

Two main factors appear to be behind the surge: slightly lower borrowing costs and aggressive sales incentives from builders.

According to Freddie Mac, the average 30-year fixed mortgage rate slipped to 6.56 percent by late August from 6.72 per

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