Sales of new homes in the United States posted a better-than-expected increases in May, the government said Tuesday, recovering ground lost as the coronavirus pandemic hit.

New home sales jumped 16.6 percent above April to a seasonally adjusted annualized rate of 676,000, according to the Census Bureau. The rate was up 12.7 percent compared to May of last year.

Growth was seen in all regions except the midwest.

"Pent up demand ahead of the virus outbreak and households' shifting preference for more space as well as lower mortgage rates are likely boosting sales," said Rubeela Farooqi of High Frequency Economics.

However, she warned that the coronavirus, which remains present throughout the country and is increasing in parts of it, could reverse the progress, as could the continuing joblessness caused by lockdowns to stop its spread.

New US home sales rebounded strongly in May, thanks to the easing of virus lockdowns that boosted contract signings
New US home sales rebounded strongly in May, thanks to the easing of virus lockdowns that boosted contract signings AFP / Olivier DOULIERY

The housing market is vital to the world's largest economy and has faired unevenly among the pandemic.

Existing home sales have fallen for the last three months, though prices have been supported by tightening inventory.

Ian Shepherdson of Pantheon Macroeconomics said the comparatively positive figures among new homes reflects both differences in how the indicators are measured and the industry's ability to adapt.

"Homebuilders quickly adopted technology -- virtual tours, electronic contracts -- to limit the hit from the virus-driven lockdowns. These innovations were not as accessible to small real estate brokerage firms and private sellers," Shepherdson said.

New home sales are based on contract signings, which dropped in April amid the virus lockdowns. The easing of those orders have led to the comparatively healthy May numbers, Shepherdson said.

Coronavirus