Sales of new U.S. single-family homes rose in May to the highest level in six years, the government reported Tuesday, providing the strongest signal yet that housing is recovering from a recent slowdown.
The Commerce Department said sales surged 18.6 percent - the biggest monthly increase since early 1992 - to an annual rate of 504,000 units, the highest level since May 2008. The May increase was significantly bigger than economists had expected.
Compared to May 2013, sales were up 16.9 percent, pointing to some momentum in the new-homes market.
The inventory of unsold new homes was unchanged at 189,000 in May, an extremely low level that highlighted the fact that the supply of new homes remains well below historic averages. With inventories tight, the median price of a new home increased 6.9 percent last month from a year earlier. However, the pace of home-price gains is slowing, which should help to stimulate demand for houses.
Home sales peaked last year at an annual rate of 459,000 in June, but then weakened. The decline reflected an increase in mortgage rates that occurred after the Federal Reserve (Fed) started discussing reductions to its monthly bond purchases that were keeping long-term interest rates low.
Even with the big overall gain in May, sales of new homes still are at half the pace of a healthy real-estate market. But there have been some encouraging signs of a spring rebound in housing, including a report Monday that sales of previously owned homes jumped 4.9 percent in May, the biggest monthly gain in almost three years.