New single-family home sales were up 7.6 percent from April or 369,000 annualized sales, according to a report released by the Commerce Department on Monday.
May's sales were the highest since April 2010 and were up nearly 20 percent above the same month a year ago.
In spite of the positive data, the annual sales pace is less than half the 700,000 that economists consider to be an upturn in the housing market.
The report noted that prices for new homes rose 5.6 percent in May from the same month a year ago to a median of $234,500.
The data shows that house and apartment builder are gaining confidence in the market and starting to construct more homes. Mortgage rates have plunged to the lowest levels on record, making home-buying more affordable.
Prices remain low and have started to stabilize. And sales of previously occupied homes are much higher than the same time last year.
Though new homes represent less than 20 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.
