-David Sloan, senior economist at 4Cast Inc.
Sales of previously owned homes rose to the highest level in more than five years in May, the latest sign that housing and overall economic growth were gaining momentum in the second quarter. Existing home sales surged 5.1% in the reported month to an annualized rate of 5.35 million, versus the 5.28 million unit sales economists had expected and following an upward revision of 5.09 million sales in April. Strong sales in May were driven partly by first-time home buyers coming back to the market. First-time buyers rose to 32% of all buyers from 27% at this time last year, according to the National Association of Realtors. Employment gains, increasing incomes and cheap borrowing costs have been propelling sales after a period of uneven demand from late 2014 through early this year. The prospect of higher interest rates as the Federal Reserve considers normalize monetary policy may be fostering more Americans to embark on homeownership.
May's strong home sales report added to last week's data on building permits in painting an upbeat picture of the housing market. It joined sturdy retail sales, consumer sentiment and employment data reports in indicating a building up of momentum in the world's number one economy after output shrank in the beginning of the year.
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