New homes under construction in a development in Atlanta, Ga.
It looks like construction could be making a comeback.
Sales of newly built homes shot up to their highest level in more than two years, the Commerce Department reported Monday, jumping almost 8 percent from April. Year-over-year, sales were a whopping 20 percent higher.
Prices for new homes rose almost 6 percent over last year's May numbers, as well.
That's good news for the construction industry, which has languished in the wake of one of the nation's worst housing busts. Strengthening demand for new homes has also boosted builder sentiment, which rose to its highest level in five years, according to the National Association of Home Builders.
Monday's new home sales numbers come on the heels of other weakening housing data last week. Although existing home sales were up almost 10 percent year-over-year, May numbers revealed a slight pullback. Meanwhile, builders broke ground on significantly fewer homes in May, stoking fears that gains in the construction sector might be fizzling out.
[Read: McMansions Making a Comeback.]
Despite all the mixed messages, economists are confident that the housing market has "hit bottom" after more than five years of steady home price declines and anemic demand.
"We see the May new home sales report as yet another data point that supports our view that housing is in a moderate recovery phase," Michael Gapen of Barclays wrote in a note to clients.
Nevertheless, economists expect more ups and downs from the housing market in coming months, especially if the economy continues to slow. May saw some of the worst job gains, which could translate into waning demand for housing.
Meg Handley is a business reporter for U.S. News & World Report. You can reach her at mhandley@usnews.com and follow her on Twitter.
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