WASHINGTON -- U.S. home sales rose last month to the highest level since February 2007 as buyers rushed to close deals before interest rates rise further.

The National Association of Realtors says sales of previously occupied homes rose 1.7 per cent to a seasonally adjusted annual rate of 5.48 million in August. That is consistent with a healthy market.

August sales reflect contracts signed in June and July, when mortgage rates were rising steadily. The Realtors' group cautioned that buyer traffic dropped off significantly in August. That means sales could slow in the months ahead.

The Realtors forecast that sales will average 5.2 million in 2014.

Home prices rose as the supply of available homes remained tight. There were 2.25 million homes for sale last month, down 6 per cent from a year earlier.