A surprisingly large number of Americans took advantage of low mortgage rates to buy new homes in September, signaling continued strength in the real estate market.

New-home sales rose 3.5% in September to an annualized 1.206 million, according to a government report out Wednesday. Economists were expecting sales to drop to 1.150 million, down from the revised 1.165 logged in August.

The September figure marks a 7% increase over the 1.127 new home sales recorded in September 2003.

Low interest rates kept the housing market hot for the month, despite increasing concerns about a sluggish job market and record-high oil prices. Wednesday's news followed another glowing report out Monday from the National Association of Realtors, saying U.S. sales of previously owned houses rose 3.1% in September to an annualized 6.75 million houses.

In September, the average rate on a 30-year mortgage was 5.75%, down from 5.87% in August and 6.15% in September 2003. New-home sales were up in all regions except the West, where sales dipped 0.8%. Sales were up 6.0% in the Northeast, up 12.3% in the Midwest and up 2.7% in the South.