US home resales surged to a five and a half-year high in May as first-time buyers stepped into the market, the latest indication that housing and overall economic activity were gathering steam in the second quarter.
The strengthening economic outlook likely keeps the Federal Reserve on course to raise interest rates later this year.
The National Association of Realtors said yesterday existing home sales increased 5.1pc to an annual rate of 5.35m units, the highest level since November 2009. That put sales this year on track for their strongest gain since 2007.
"It suggests that the US housing market recovery is back on track after the missteps earlier this year. We expect this upbeat tone in the housing recovery to continue as the favourable domestic fundamentals begin to reassert themselves," said Millan Mulraine, deputy chief economist at TD Securities in New York.
Tightening labour market conditions are starting to spur stronger wage growth, boosting demand for housing.
Last month's increase reversed April's surprise drop in purchases, which economists had dismissed as a blip given that forward-looking indicators on home sales, including mortgage applications, had been fairly strong during that period.
The Realtors group revised April's sales pace up to 5.09m units from the previously reported 5.04m units. Economists had forecast home resales rising to a 5.26m-unit pace last month.
First-time buyers accounted for 32pc of transactions, the largest share since September 2012. Still, the share remains well below the 40pc to 45pc that economists and realtors say is required for a robust housing market.
May's sturdy home sales report added to last week's data on building permits in portraying an upbeat picture of the housing market.
It joined strong retail sales, consumer sentiment and employment data in suggesting a building up of momentum in the economy after output contracted at the start of the year.
US stocks were trading higher on the housing data.
Market sentiment was also buoyed by hopes of a deal to avert a debt default by Greece. The housing index .HGX was up 0.63pc, with shares in DR Horton the largest US homebuilder, rising 1.5pc.
The dollar rose slightly against a basket of currencies, while prices for longer-dated US Treasury debt fell sharply.
The share of first-time buyers was up from 27pc a year ago and the latest increase reflects moves by the government to ease lending conditions for this demographic through Fannie Mae and Freddie Mac, the mortgage finance companies it controls. (Reuters)