Sales of newly built U.S. single-family homes rose to their highest level in nearly a year in August, according to government data on Friday that indicated the housing market was gradually recovering from a three-year slump.

New home sales have risen for five straight months. The Commerce Department said sales rose 0.7 percent to a 429,000 annual pace, the highest since September last year, from a downwardly revised 426,000 in July.

However, the increase was below market expectations for a 440,000 unit rate. July's sales pace was previously reported at 433,000 units.

Compared to August last year, total new homes sales fell 3.4 percent.

The median home sales price in August fell percent 11.7 percent from a year earlier to $195,200, the lowest since October 2003, the department said. In July, the median home price was $215,600.

The inventory of new homes available for sale at the end of August fell 3.0 percent to 262,000 units, the lowest since November 1992.August's sales pace left the supply of new homes available for sale at 7.3 months' worth, the lowest since January 2007.

(Reporting by Lucia Mutikani; Editing by Theodore d'Afflisio)