Sales of new single-family homes blew past all expectations in May even as prices and inventory continued to present a challenge.
According to figures released Tuesday by the Census Bureau, new home sales last month were at a seasonally adjusted annual rate of 504,000, representing an 18.6 percent spike above April's downwardly revised rate of 425,000.
It was the highest sales pace since 2008.
Economists surveyed by Econoday had called for a consensus forecast of 441,000 annualized sales in May, while the Mortgage Bankers Association had predicted a sales rate of 374,000 based on application volumes at mortgage subsidiaries of homebuilders nationwide.
May gains were led by the Northeast, where sales were up 54.5 percent month-over-month to an adjusted annual rate of 34,000.
In the more active South and West regions, sales rose 14.2 percent and 34.0 percent, coming to rates of 266,000 and 130,000, respectively.
Meanwhile, sales in the Midwest bumped up only slightly to 74,000—a 1.4 percent increase.
The gain in sales numbers was accompanied by a pickup in prices, which came to median $282,000 in May, up from $269,700 in April. While the average price was down slightly from April to $319,200, it came up more than $5,000 from a year ago.
As buyers continue to face challenges finding affordable homes, the surge in sales despite rising prices is promising, say economists Patrick Newport and Stephanie Karol at IHS Global Insight.
"As May's dip in mortgage rates was relatively small, we believe that this pattern indicates that a larger number of buyers entered the marketplace last month, bidding up the price," the two said in an analysis. "This is consistent with yesterday's existing home sales report, and should incentivize further building."
As of the end of the month, the government estimates there were a seasonally adjusted 189,000 new units for sale, flat from April. With the improvement in sales, the months' supply of homes at the current sales pace was down to 4.5, a drop of nearly a full month.
"Thus far in 2014, builders have had more homes left over at the end of the month, despite having sold the same number of homes during the month—or, in the case of this month, far more homes," Newport and Karol said. "This reflects builders' willingness to ease inventories, given a reasonable (and data-supported) expectation that the new inventory will sell in fairly short order—a positive for the housing market going forward."