NEW YORK (CNN/Money) - Sales of existing homes rose unexpectedly to a record pace in June, as home buyers shrugged off higher mortgage rates to easily top Wall Street expectations.

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The National Association of Realtors reported Monday that June sales came in at an annual rate of 6.95 million, up from the slightly 6.81 million pace in May, which was the previous record. Economists surveyed by Briefing.com had forecast that the annual sales pace would fall to 6.65 million.

Mortgage interest rates have been climbing steadily since reaching near 40-year lows in mid-March. But the NAR said earlier this month that it expected strength in the economy to keep home sales strong the rest of the year, even with the higher interest rates.

"Although we've been expecting sales to ease, it's clear the market has tremendous momentum," said a statement from David Lereah, NAR's chief economist. "The improving job market and higher consumer confidence are feeding into a large demographic demand for housing."

Lereah said it is unlikely sales will top the June record again this year, but that even with the sales pace slowing they should remain strong. The NAR is projecting full-year sales will top the 6.1 million existing home sales record set in 2003.

Housing inventory levels are tight. At the end of June they stood at 2.40 million home listings, down 0.8 percent from May and equal to about a 4.1 month supply at the current sales pace. That has kept home prices firm in the face of the rising mortgage rates.

The association said the median home price was $191,800 in June, up 9.6 percent from June 2003 when the median was $175,000. The median price is the point where half the sales are at a lower price and half the sales are at a higher price.

Mortgage financing firm Freddie Mac said the national average rate for a 30-year, conventional, fixed-rate mortgage was 6.29 percent in June, up from 6.27 percent in May. In June 2003 rates hit a record low of 5.23 percent. Rates have risen from 5.45 percent average in the last three months of the survey data.

"Considering most forecasts projected mortgage interest rates to gradually rise, this could keep the housing market from taking as much of a breather as we have anticipated," said NAR President Walt McDonald in the group's monthly statement.

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The strongest region for home sales was the Midwest, where sales increased 3.5 percent in June compared with May, putting its sales up 22.8 percent compared to June of 2003.

The West saw sales up 3.1 percent while the Northeast posted a 2.8 percent. The weakest gain was in the South, were sales edged up only 0.4 percent, but that was still up 18.5 percent from a year earlier, giving the region the second-best year-over-year percentage gain.