NEW YORK (CNN/Money) - The pace of new home sales edged slightly higher in October from the strong sales shown the previous month, according to a government report Wednesday.

The Census Bureau report shows new home sales sold at an annual pace of 1.23 million new homes in October, up 0.2 percent from the revised September sales rate of 1.22 million homes.

The reading came in a bit better than Wall Street expectations. Economists surveyed by Briefing.com had forecast a 1.2 million sales pace in the month.

The October sales pace is the third best rate in history, behind only March's 1.27 million sales pace and the 1.24 million pace set in May. The sales pace is 7.4 percent above year-earlier levels.

The sales pace is helped by low mortgage rates. The survey of mortgage rates by home lending financier Freddie Mac shows the average rate for a 30-year fixed-rate mortgage at 5.72 percent this week, the same as the rate in October as a whole.

The most recent rates are down more than 0.6 percentage point from levels of six months ago.

The low mortgage rates have helped support new home sales prices. The median sales price, which represents the point at which half the homes sold cost more and half cost less, was $221,800 in October. That's a spike up of 9 percent from September and up 14 percent from a year earlier.

A tight supply of new homes has also helped keep prices strong. The report estimates a 4.1 month supply of new homes on the market.

The new home sales figures are watched because they are a leading indicator of the real estate market, since the reading is taken when a sales contract is signed or a deposit is taken, rather than when the new home purchase is actually closed.

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An existing home sales report Tuesday from the National Association of Realtors, which is based on home closing readings, also showed continued strength in October.

While new home sales make up only a fraction of home sales overall, they are also closely watched because of the impact on construction employment. New home buyers also generally spend more on new appliances and furnishings than existing home buyers.