WASHINGTON - U.S. sales of previously occupied homes surpassed the 5 million mark in May, the first time that's happened in 3 1/2 years. The gain shows the housing recovery is strengthening.
The National Association of Realtors said Thursday that home re-sales rose 4.2 per cent in May to a seasonally adjusted annual rate of 5.18 million. That's up from April's pace of 4.97 million.
Sales last exceeded 5 million in November 2009. During that month and October 2009, a home-buying tax credit briefly inflated the sales pace. Prior to that, sales hadn't been above 5 million since July 2007.
While the sales pace is still below the 5.5 million rate that is consistent with healthy markets, it has risen nearly 13 per cent in the past 12 months.
The Realtors' group said the median price of a home rose in May to $208,000, the highest level since July 2008. That represented a 15.4 per cent jump from a year ago, the fastest year-over-year gain since October 2005.
The housing recovery is looking more sustainable and should continue to boost economic growth this year, offsetting some of the drag from higher taxes and federal spending cuts.
Steady hiring and low mortgage rates have encouraged more people to buy homes. The increased demand, along with a tight supply of homes for sale, has pushed home prices higher. That's made builders more optimistic about the market for newly built homes, leading to more construction and jobs.
On Wednesday, Federal Reserve Chairman Ben Bernanke cited the housing gains as a major reason the Fed's economic outlook has brightened.
Still, mortgage rates have jumped in recent weeks. And they are expected to rise further now that the Fed has signalled it plans to scale back its bond purchases this year if the economy continues to strengthen. Higher mortgage rates could slow some of the housing market's momentum.
A better outlook for housing has made builders more optimistic. The National Association of Home Builders/Wells Fargo builder sentiment index rose in June to 52, up from 44 in May. It was the highest reading in more than seven years and the largest monthly increase in more than a decade. A reading above 50 indicates more builders view sales conditions as good rather than poor.