New-home sales shot up 8.1 percent in May, the biggest advance in six months, as low mortgage rates motivated buyers.

The larger-than-expected increase pushed up sales of new single-family homes to a seasonally adjusted annual rate of 1.03 million, a record monthly level, the Commerce Department reported Wednesday.

Separately, the nation's factories, hardest hit by last year's recession, saw fresh signs of improvement in May, with orders for costly manufactured goods rising 0.6 percent, the department said in another report.

The advance in durable-goods orders -- items expected to last at last three years -- came after a 0.4 percent increase in April.

Unlike manufacturing, the housing market was one of the economy's few bright spots during the slump, in large part because of low mortgage rates. Low rates are continuing to keep the housing sector healthy.

Another factor motivating buyers: Solid appreciation in housing values, which offers people an attractive investment, especially as the stock market has been weak, economists say.

Economists were predicting new-homes sales in May would rise by 0.5 percent to a rate of 920,000. The 8.1 percent increase was the largest since November.

On Tuesday, the National Association of Realtors reported that sales of previously owned homes dipped by 0.3 percent in May, but still racked up the fourth-highest monthly level on record: a rate of 5.75 million units.

In May, the average rate on a 30-year fixed-rate mortgages was 6.81 percent, down from 6.99 percent in April and well below the 7.15 percent rate in May 2001, according to Freddie Mac, the mortgage company. Last week, rates on 30-year mortgages fell to 6.63 percent, the lowest in five months, Freddie Mac reported.

By region, sales of new homes in May jumped 26.4 percent in the Northeast to a seasonally adjusted annual rate of 67,000. In the South, sales rose 10.6 percent to a rate of 482,000, and in the West, they went up 4.3 percent to a rate of 289,000. Sales in the Midwest increased 2.7 percent to a rate of 190,000.

New-home sales went up by 3.9 percent in April, according to revised figures. That was considerably stronger than the 1 percent rise previously reported.

In the manufacturing report, the 0.6 percent increase in new orders to factories in May was the largest since a 1.7 percent advance in February. It marked the fifth increase in the last six months.

The latest snapshot of manufacturing activity clearly shows an economic sector on the mend after being mired in a long slump during which hundreds of thousands of jobs were cut as production was throttled back.

But Wednesday's report and other manufacturing data suggest the factory sector isn't going gangbusters. That partly reflects the fact that businesses, worried about the staying power of the national economic recovery, are reluctant to make big commitments, including investments in new plants and equipment, a key ingredient for a sustained rebound.

Shipments, a good barometer of current demand, were flat in May, following a 3.4 percent jump in April.

Factories reported that new orders for fabricated metal products rose 2.4 percent in May, on top of a 1 percent rise the previous month.

Orders for primary metals -- including steel, went up 0.9 percent, down from a strong 6.3 percent increase.

For computers and electronic products, orders rose 1 percent in May, compared with a 2.9 percent increase the month before.

There were some weak spots. Orders for cars fell 2 percent in May, following a 12.1 percent jump. Orders for electrical equipment and household appliances declined by 2.1 percent, down from a 10.3 percent advance. And, orders for machinery dipped 0.4 percent, following a 4.5 percent increase.