WASHINGTON – Sales of new U.S. homes surged well past expectations in May to a record high, as generally rising mortgage interest rates did little to restrain home buying, a government report showed on Thursday.
Sales of new homes jumped 14.8 percent to a seasonally adjusted annual rate of 1.369 million units from an upwardly revised 1.192 million in April, the Commerce Department (search) said. It was the biggest monthly climb since April 1993.
Analysts polled by Reuters were expecting sales to rise more modestly to 1.12 million units from the originally reported 1.093 million pace on the strength of mortgage applications.
Sales of new homes reached a record high 663,000 annual rate in the South, the region with the greatest volume of activity. They rose to a 121,000 rate in the Northeast, the highest level since January 1989.
Inventories fell to a record low 3.3 months' supply of new homes available for sale at the current sales pace.
Applications for loans to buy homes rose slightly last week, the Mortgage Bankers Association (search) reported on Wednesday. While applications for refinancing slipped, bids to buy new homes rose, a trend economists said reflects demand for homes despite a pattern of rising interest rates for mortgage loans.
U.S. housing starts fell 0.7 percent in May, less than expected, and permits rose to a 30-year high. Economists said gradual increases in mortgage rates were doing less than expected to hold back demand for homes.
U.S. 30-year fixed rate mortgages rose slightly last week to 6.32 percent, mortgage finance giant Freddie Mac said.