Sales of single-family homes, townhomes, condos and co-ops hit a seasonally adjusted annual rate of 4.89 million, up 4.9% from April's revised 4.66 million rate, the National Association of Realtors said Monday.
The monthly percentage gain was the highest since August 2011. Last month's sales rate also beat economists' median forecast of 4.73 million in Action Economics' survey.
"The long-awaited spring bounce in home sales looks to have finally appeared," said RBS Markets chief U.S. economist Michelle Girard in a research note.
Both sale prices and inventory improved last month, which is a good sign, said Stephanie Karol, of IHS Global Insight.
"As long as sellers feel assured of making a profit, they will feel emboldened to list their homes; and as buyers feel they have a good selection of well-located properties to choose from, they will continue to look and bid," she said in a research note.
Despite sales' improving trend the past two months, they are still weaker than last year. In May 2013, the annualized sales rate was 5.15 million.Through May, sales are down 8.2% from the first five months of last year.
The market also continues to be difficult for buyers with modest financial resources, such as first-time buyers. Their share of sales declined to 27% in May, down 2 percentage points from April and from April 2013.
Although single-family home sales rose 5.7% from April, they're also down 5.7% from a year ago.
Compared with last year, the lower-priced end of the market looks weakest. Sales of homes under $100,000 and from $100,000 to $250,000 fell in every region of the country last month compared with May 2013. But sales of homes priced at $1 million and above rose everywhere but the Midwest.
The median existing home price was $213,400 in May, up 5.1% from a year earlier.
Still, more homes on the market, prices that are rising more slowly than in 2013 and recent declines in mortgage rates should create better conditions for more buyers, said Lawrence Yun, chief economist of the National Association of Realtors.
Freddie Mac reported last week that the U.S. average for a 30-year mortgage was 4.17%. That compares with an average 4.48% last December and 3.93% a year ago.
This year's declines in interest rates are likely to be temporary. Rates are expected to tick up as the Federal Reserve pares the monthly bond purchases it launched in 2012 to hold down long-term interest rates.
The Realtors group said total housing inventory at the end of May rose 2.2% to 2.28 million existing homes available for sale. That's 6% higher than a year ago.
At May's sales rate, there's a 5.6-month supply of homes for sale, which is still below the 6-month inventory that's considered a balanced market between buyers and sellers.
More data on the housing market is due Tuesday when Standard & Poor's releases the Case-Shiller Index of home prices for April, and the government reports on new home sales for May.
