Sales of new single-family homes rose 0.7% to a seasonally adjusted annual rate of 429,000 in August from July, the Commerce Department reported Friday. The increase, however, was driven entirely by the West region and was less than half the 1.6% gain that economists expected.

Despite the increase, new-home sales were 3.4% off last August's pace.

The Commerce Department also took down its estimate for July new-home sales from 433,000 to 426,000, representing an increase from June of 6.5% from the 9.6% jump originally reported.

Meanwhile, the median sales price fell 9.4% from July to $195,200; the average sales price fell 5.9% to $256,800. Nearly two-thirds of the homes sold in the month went for less than $300,000.

New single-family houses for sale at the end of August was 262,000, a 7.3-month supply, down from 7.6 months in July. Months-supply peaked at 12.4 in January. Of the homes for sale, 38,000 were not yet started, 114,000 were under construction and 114,000 were complete. Median months-for-sale of new single-family homes increased to 12.9 months from 12.5 months in July.

Regionally, the Northeast was down 16.3% from July to a seasonally adjusted rate of 36,000 from July but was up 28.6% from last August. The Midwest was down 5.8% to a rate of 49,000, 31.9% below August, 2008. The South was flat at a rate of 224,000, 11.1% off last year's pace. The West was up 12.1% to a rate of 120,000, 30.4% ahead of last August.

The news weighed on the home builder stocks, which were down across the board midway through the trading session. The XHB home building ETF was trading down more than 2%at $14.93 shortly before noon Friday.