New homes sales surged 18.6 percent in May, more than making up for the modest downward revision to April’s numbers. The strongest gains were seen in the South and the West.

Housing Market Is Looking up                                

New home sales jumped to a 504,000-unit annualized pace, the highest in six years.

The gain comes on the heels of better-than-expected existing home sales numbers released yesterday. This is welcome news considering the general weakness in home sales seen during the first part of the year.

Such a large jump in sales drove already-tight inventories to an even-lower 4-5 months’ supply.

Sales Improve Across Regions

The South and the West are the two largest regions for new home sales and were responsible for the majority of May’s rise. The Midwest kept up its pace of sales after a sizable gain in the previous month, while the relatively small market in the Northeast posted a modest gain as well.

Stronger sales, tighter inventories and improving builder sentiment bode well for new home construction.