Sales jumped for the third consecutive month. the May increase was the largest since February 2022.

The strength in new home sales was felt across the country, led by the Northeast and West. Overall, new home sales have been moving higher as homebuilders are one of the few players providing inventory for homebuyers.

The Commerce Department reported Tuesday that U.S. new home sales rose 12.2 percent to an annual rate of 763,000 units in May, compared with a revised 680,000 units the previous month.

The figure, which is seasonally adjusted, refers to how many homes would be built over the course of a full year if builders continued to build at the same rate each month.

The jump exceeded Wall Street's expectations. Economists had forecast new home sales in May to total 675,000 units.

The April figure was revised sharply. new home sales increased to a revised 680,000 units in April, compared to an initial estimate of a 4.1% increase to 683,000 units.

New home sales data fluctuate on a monthly basis and are often revised.

Key Details: The median sales price of new homes sold in May declined to $416,400 from the previous month.

The supply of new homes for sale fell 11.8% between April and May, the equivalent of a seven-month supply.

Regionally, the Northeast and West led the nation in new home sales, each recording an increase of about 17 percent.

Overall, new home sales were up 20 percent compared to last year.

The Big Picture: The housing market may be struggling due to a lack of inventory and high mortgage rates, but homebuilders are thriving as buyers flock to new construction and they find more choices.

Builders' confidence in future sales is high as homeowners continue to hold out for the ultra-low mortgage rates they refinanced during the pandemic. new home construction in the U.S. jumped nearly 22 percent in May 2023.

What are they saying?" Despite significantly higher mortgage rates over the past 15 months, the conditions are in place for further increases in sales," Richard Moody, chief economist at Regions Financial Corporation, wrote in a note.

"As we have argued from the start of the mortgage rate increase, there remains considerable pent-up demand for homes, reflecting the extent to which the market has been undersupplied over the past decade or so," he explained.

With the inventory of existing homes for sale so low, more demand is being funneled into the new home market, which builders are already in a position to exploit," Moody's wrote.

The National Association of Home Builders noted that new homes accounted for about 31 percent of the total housing inventory in May. Historically, new homes account for about 10 to 15 percent of total inventory.

Market reaction: Stocks rose in early trading Tuesday. the yield on the 10-year Treasury note rose above 3.73 percent.

Stocks of builders, including D.R. Horton, Inc., Lennar Corp., PulteGroup Inc. and Toll Brothers Inc. were mixed in morning trading.