The seasonally adjusted annual rate was higher than analysts expected – many economists predicted a decline. It was also 12.7% higher compared to year-ago numbers.

WASHINGTON (AP) – Sales of new homes rose a surprisingly strong 16.6% in May with the reopening of major parts of the country potentially fueling activity in the housing market.

The Commerce Department reported Tuesday that sales of new single-family homes rose to a seasonally adjusted annual rate of 676,000 last month. That was a much better performance than expected. Many economists had forecast that sales would fall in May.

The new home sales numbers come just one day after the U.S. reported a 9.7% plunge in May sales of existing homes to an annual rate of 3.91 million, the slowest pace in nearly a decade.

There are hopes that the housing slump that occurred with the virus shutdowns could be coming to an end, though the millions of jobs lost to the pandemic could impede any rebound.

Nancy Vanden Houten, the lead U.S. economist with Oxford Economics, said she expected a modest recovery in sales in the coming months following the big declines in the first quarter, but she still expects a decline overall this year.

“The slow recovery in the labor market will limit the upside of any rebound in the housing market,” she said.

The median price of a new home rose 4.9% to $317,900 in May after falling by 8.7% in April, a drop that was attributed to heavy discounting by builders in the midst of the coronavirus shutdowns. The big sales rebound left activity in May 12.7% higher than a year ago.

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