New homes sold in May at the fastest pace in more than two years. The increase suggests a modest recovery is continuing in housing, despite weaker job growth.
The Commerce Department said Monday that sales of new homes increased 7.6% in May from April to a seasonally adjusted annual rate of 369,000. That's the best pace since April 2010, the last month that buyers could qualify for a federal home-buying tax credit.
Even with the gains, the annual sales pace is less than half the 700,000 that economists consider to be healthy.
Yet, the increase follows other signs that show the housing market is improving nearly five years after the bubble burst.
Builders are gaining confidence in the market and starting to build more homes. Mortgage rates have plunged to the lowest levels on record. Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.
Though new homes represent less than 20% of the market, they have an outsize impact on the economy. Each home built creates an average of three jobs, according to the National Association of Home Builders.
Meanwhile, the supply of new homes for sale remains extremely low. Just 145,000 new homes were for sale in May. That's not much higher than the 144,000 available in April, which was the lowest supply on records dating to 1963.
At the current sales pace, it would take 4.7 months to exhaust the May supply. A six-month supply is generally considered healthy by economists.
"With no excess inventory of unsold new homes, any sustained rebound in new home sales should quickly translate into firmer prices," said Steven Wood, chief economist at Insight Economics.
Builders are responding to the low supply. In May, they requested the most permits to construct homes and apartments in three-and-a-half years.
Sales surged 36.7% in the Northeast and 12.7% in the South. Sales fell 10.6% in the Midwest and were down 3.5% in the West.
Sales of previously occupied homes fell in May to a seasonally adjusted annual rate of 4.55 million after nearly touching a two-year high in April. Still, resales were up 9.6% from May 2011.
By Martin Crutsinger, The Associated Press
