Sales of new U.S. single-family homes fell in August, but declining mortgage rates and house prices could stimulate demand in the months ahead.

New home sales dropped 4.7% to a seasonally adjusted annual rate of 716,00 units last month, the Commerce Department's Census Bureau said on Wednesday. The sales pace for July was revised higher to 751,000 units from a previously reported 739,000 units.

Economists polled by Reuters had forecast new home sales, which account for more than 10% of U.S. home sales, falling to a rate of 700,000 units. New home sales are counted at the signing of a contract. They, however, can be volatile on a month-to-month basis. Sales rose 9.8% on a year-on-year basis in August.

The average rate on the popular 30-year fixed-rate mortgage dropped to 6.09% last week, the lowest since February 2023, from 6.20% in the prior week, data from mortgage finance agency Freddie Mac showed.

The Fed last week cut its benchmark overnight interest rate by 50 basis points to the 4.75%-5.00% range.

The median new house price decreased 4.6% to $420,600 in August from a year ago.