This was much stronger than the modest 1.2% expected.
April's growth rate was revised up to 0.5% from 0.4%.
"Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” said the National Association of Realtors' Lawrence Yun. “However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total."
Here's more from Yun:
"The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10 percent behind last year’s pace. Meanwhile, apartment rents are expected to rise 8 percent cumulatively over the next two years because of tight availability ... Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable"
According to the NAR, this is "the largest month-over-month gain since April 2010 (9.6 percent), when first-time home buyers rushed to sign purchase contracts before a popular tax credit program ended."
"This report reinforces our expectation that housing market activity will improve in the second quarter and is consistent with our forecast of a 0.3pp contribution to real GDP growth from residential investment in Q2 after it acted as a 0.1pp drag in the first quarter, said Barclays' Cooper Howes.
But not everyone is optimistic.
"The story here, we think, is all about post-winter catch-up rather than a renewed, sustainable rebound after the shock of rising mortgage rates last year," said Pantheon Macroeconomics' Ian Shepherdson. "The trend in mortgage applications remains very low and the trend is flat, so we expect no repeat of the May jump in sales during the summer."
Written by Sam Ro
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