WASHINGTON (AP) — Sales of new U.S. homes rose in May to the highest level in six years, providing the strongest signal yet that housing is recovering from a recent slowdown.
New home sales jumped 18.6 percent last month following a 3.7 percent increase in April, the Commerce Department reported Tuesday. The gains followed declines in February and March that were blamed in part on harsh winter weather.
The big May increase pushed the seasonally adjusted annual sales rate to 504,000, the highest level since May 2008.
"This is the strongest level since the end of the recession and is an encouraging sign that housing activity improved in the second quarter," Cooper Howes, an economist at Barclays Research, said in an analyst note.
Home sales peaked last year at an annual rate of 459,000 in June, but then lost altitude. The decline reflected an increase in mortgage rates that occurred after the Federal Reserve began discussing pulling back on its monthly bond purchases that were keeping long-term interest rates low.
The inventory of unsold new homes was unchanged at 189,000 homes at the end of May, the same as April. That inventory level would be depleted in 4.5 months at the May sales pace, an extremely low level that underscored the fact that the supply of new homes remains well below historic averages.
Sales were up in all regions of the country in May, led by a 54.5 percent surge in sales in the Northeast. New home sales rose 34 percent in the West and 14.2 percent in the South. The Midwest had the smallest month-over-month sales gain of just 1.4 percent.
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