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New home sales soar in May

By Judy Martel · Bankrate.com
Monday, June 25, 2012
Posted: 6 pm ET

The housing market isn't restored to health yet, but sales of new homes in May increased at its fastest pace since April 2010, according to the Commerce Department.

New home sales increased 7.6 percent last month, to a seasonally-adjusted annual rate of 369,000 homes. But despite that upbeat statistic, it's still less than half the 700,000 home sales considered by economists to signify a healthy market.

It seems like a long, hard slog from when the housing bubble burst in 2008, but there are other signs of progress in the housing market. Mortgage rates are still at historic lows and prices are stabilizing in many areas of the country. According to Bloomberg, the median home price of $234,500 was .6 percent lower in May than it was a month earlier, but 5.6 percent higher than in May 2010.

Builder confidence has also been improving and although new home sales comprise less than 20 percent of the housing market, the impact on the economy is larger than it is with sales of existing homes. Typically, when a home is built, it creates an average of three jobs for a year, according to the National Association of Home Builders. Builders are ramping up in response to buyer demand, requesting more building permits in May than they have in more than three years.

Do you see signs of improvement in the housing market in your neighborhood?

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