New home sales soar in May, hit highest level since 2008

Sales of newly built homes surged in May, further evidence that the housing recovery strengthened during the spring selling season.

New home sales rose 18.6% from April to a seasonally adjusted annual rate of 504,000 units, the Commerce Department said Tuesday. That was the highest rate in six years and 16.9% more than May 2013 levels.

The gain beat expectations and marked the second straight month-over-month increase. Economists polled by Bloomberg News had called for a rate of 439,000.

The report is the latest signal that the housing market is heating up. The housing recovery slowed in the second half of 2013 after prices surged and mortgage rates rose. In the face of high costs, families and investors pulled back.

But recently buyers are returning. Price appreciation has slowed as more homes have come on sale. And recently mortgage rates ticked down. Those trends have provided a jolt to a wavering housing recovery, economists say.

Sales of new homes rose in all regions. In the West, sales climbed 34% from April. The Northeast saw the largest gain, as sales soared 54.5%.

Inventory fell to a 4.5-month supply in May -- meaning that if new homes continued to sell at their current pace, they would sell out in that time period. There was a 5.3-month supply in April

Economists say new home sales, based on signed contracts for single-family homes, are a timelier indicator of demand than existing home sales figures, which are based on closed deals. However, the new home report is subject to sharp revision, given its small sample size.

Existing home sales -- the largest segment of the market -- rose 4.9% in May from a month earlier, the National Assn. of Realtors said Monday.

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