Americans snapped up new homes in June at the fastest pace in five years, a sign the housing recovery is strengthening.
The Commerce Department said Wednesday that sales rose 8.3 percent last month to a seasonally adjusted annual pace of 497,000. That's up from an annual pace of 459,000 in May, which was revised lower.
While sales are still below the 700,000 pace consistent with healthy markets, they have risen 38 percent in the past 12 months. That's the biggest annual gain since January 1992.
"There's an awful lot of headroom for more gains in new-home sales once the job market recovers more fully," Jonathan Basile, an economist at Credit Suisse, said in a note to clients.
Home sales and prices have climbed since early last year, buoyed by solid hiring and low mortgage rates. Housing has helped drive economic growth this year at a time when other parts of the economy have languished, such as manufacturing and business investment.
New-home sales make up only a small part of the market but have a large impact on the economy. Each home built creates an average of three new jobs and generates about $90,000 in tax revenue, according to data from the National Association of Home Builders.
One concern is that rising mortgage rates could slow sales in the coming months. The average rate on the 30-year fixed was 4.37 percent last week - a full percentage point higher than in early May. At the same time, mortgage applications to purchase homes have fallen in the past few weeks.
Rates surged after Chairman Ben Bernanke said the Federal Reserve could slow its bond-buying program later this year if the economy continues to improve. The Fed's bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.
Still, other indicators suggest housing should continue to support the economy this year.
Sales of previously occupied homes slipped in June to seasonally adjusted annual rate of 5.08 million but stayed near the 3 ½ year high reached in May.
Homebuilders are more confident about the housing recovery than at any time in seven years, according to a survey by the National Association of Home Builders/Wells Fargo. That suggests home construction should keep increasing. Customer traffic and builders' outlook for single-family home sales over the next six months are at the highest levels since the housing bubble burst in 2006.