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"New home purchase activity was robust in August, as both mortgage applications and estimated home sales increased from a year ago," said Joel Kan, MBA's associate vice president of economic and industry forecasting. "Recent increases in new residential housing permits and housing starts, lower mortgage rates, and a still-strong job market all bode well for the new home sales outlook."

Refinancing could be a smart option for your pocketbook. A reduction in even just a quarter of a percentage point could potentially shave off a couple hundred dollars from your monthly payments.

The sharp drop in mortgage rates this year, and particularly the move below 4% this summer, has given a boost to home buying," according to Greg McBride, chief financial analyst for Bankrate.com.