WASHINGTON Sales of new U.S. single-family homes surged in September, boosted by a chronic shortage of previously owned houses, but mortgage rates approaching 8% could curb demand.

New home sales rebounded 12.3% to a seasonally adjusted annual rate of 759,000 units last month, the Commerce Department said on Wednesday. August's sales pace was revised up to 676,000 units from the previously reported 675,000 units.

Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, rebounding to a rate of 680,000 units.

New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales accelerated 33.9% on a year-on-year basis in September.

A limited supply of previously owned houses is driving demand for new housing and homebuilding. Data last week showed home resales dropped to a 13-year low in September as soaring mortgage rates and tight supply combined to sideline first-time buyers from the market.

The rate on the popular 30-year fixed mortgage surged to a nearly 23-year high of 7.63% last week, according to data from mortgage finance agency Freddie Mac.

While single-family housing starts and building permits increased in September, confidence among builders deteriorated for a third straight month in October, signaling weakness ahead for the new construction market.

Nevertheless, the housing market likely stabilized in the third quarter, thanks to strong homebuilding and new home sales.

Economists expect the government's snapshot of gross domestic product for the July-September quarter to show residential investment rebounding after contracting for nine straight quarters.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)