New single-family home sales climbed 2.1 percent in May, returning to a 476,000-unit annual sales rate not reached since July 2008. The May rate is 29 percent higher than May 2012. Home prices and unsold inventories also increased in May, and although the figures remain below pre-recession levels, the housing market appears to be on a path toward sustained growth.

Sales of new homes increased to a five-year high in May, improving 2.1 percent over April and 29 percent year-over-year.

The growth brought the annual sales rate to 476,000 units, the highest level since July 2008. Most economists consider a 700,000-unit annual rate indicative of a healthy market.

The unsold home inventory rose to 161,000 units in May, the highest level since August 2011 and a 2.5 percent increase from April. At May's sales pace, it would take 4.1 months to clear the houses on the market, up from 4.0 months in April. A supply of six months is normally considered as a healthy balance between supply and demand.

Inventories are only 13 percent above the record low set in July 2012, which has contributed to an increase in home prices nationwide. The median selling price fell to $263,900, down 3.1 percent from April but up 10.3 percent year-over-year.

The sales gains were led by a 40.7 percent surge in the Midwest, followed by a 20.7 percent increase in the Northeast and a 3.6 percent gain in the West. Sales in the South decreased 9 percent, according to a June 25 Commerce Department report.