New home sales surged in May

WASHINGTON - 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.

The Commerce Department says new home sales jumped 18.6 percent in May following a 3.7 percent increase in April. 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.

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.

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