Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, which is up 2.2% from April, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

 On an annual basis, this is 19.5% above the May 2014 estimate of 457,000. The biggest gains were in the Northeast region markets.

The median sales price of new houses sold in May 2015 was $282,800; the average sales price was $337,000.

“With a nearly 20% increase in new home sales since last year, the residential market has clearly entered a period of strong and sustained recovery. The increase is a result of a strong job market, rising consumer confidence, and a moderate and much needed improvement in the supply of mortgage credit,” said Peter Ciganik, Managing Director at GTIS Partners.

“However, single family housing starts are still 40% below what they should be, and with strong household formation by the millennial cohort, we are seeing a very tight market in many locations - as attested by the 4.5 months of supply, which is well below the normal average of 6 months," he said. "We believe the current sustained recovery has several years to run for the residential market to return to normal.”

The seasonally adjusted estimate of new houses for sale at the end of May was 206,000. This represents a supply of 4.5 months at the current sales rate.

“While we have yet to see whether the recent momentum in housing will sustain, there’s no doubt that we’re in a healthier and more robust market where consumers stand to benefit,” said Quicken Loans Vice President Bill Banfield. “With inventory slipping a bit, expect to see home construction pick up the slack in the coming months.”

New home sales in April 2015 were at a seasonally adjusted annual rate of 534,000, up 6.8% from March.

“We’re excited by this morning’s results,” said Tom Wind, EverBank’s Executive Vice President of Home Lending.  “The robust demand in the housing market continues, evidenced by this latest report. We expect factors like strong job growth, low rates, and rising rental costs to continue supporting this trend.”

This morning’s report regarding prices also tracks with a trend identified in a new report from Homes.com, a price performance summary of repeat sales in the top 100 markets, and the companion Midsize Markets Report for the next 200 largest markets, which show that among the nation's top 300 markets, 137 markets (46%) have now achieved full pricing recovery in April, compared to 130 markets (43%) in March's report.

Ed Stansfield, chief property economist at Capital Economics, said that this offers some relief on the prospect of the Federal Reserve raising rates.

“The increase was led by a massive 88% m/m jump in the Northeast, where sales appear to have finally returned to the trend set before the unseasonably harsh winter,” he said. “Combined with the strong reading for existing home sales yesterday, this confirms that the second-quarter rebound underway in the wider economy is now feeding through into the housing market. Admittedly, it’s possible that buyers may be rushing through sales in advance of anticipated interest rate rises later this year.

“But mortgage affordability will still be very favorable even as rates begin to rise. As a result, we don’t expect Fed tightening to prove a significant drag on the housing market,” Stansfield said.