NWSA News Corporation

WASHINGTON—Sales of existing homes rose to their fastest pace in more than nine years and prices climbed to a new high in May, the latest sign of rising demand amid low interest rates and steady job creation.

Sales climbed 1.8% in May from the prior month to a seasonally adjusted annual rate of 5.53 million, the National Association of Realtors said Wednesday. That was the strongest sales pace since February 2007.

Economists surveyed by The Wall Street Journal had expected sales would rise 1.8% to a rate of 5.55 million in May.

May's sales were 4.5% higher than a year earlier. April's sales pace was revised down to 5.43 million.

The housing market was choppy in the opening months of the year but now sales are back at prerecession levels, leading to tight supplies and rising prices. Demand for homes appears strong as more Americans find work, wages edge higher and mortgage rates remain historically low.

The labor market posted its weakest monthly gain in more than five years in May but continued a 75-month streak of private-sector job creation. And a 30-year fixed-rate mortgage averaged 3.54% last week, down from 4% a year earlier, according to Freddie Mac. By comparison, rates averaged just over 6% during the 2001-2007 expansion.

But home builders haven't been keeping up with demand and inventories of new and existing homes are low, creating a supply crunch.

The Realtors' group said there were 2.15 million existing homes available for sale at the end of May, down 5.7% from a year earlier. That is a 4.7-month supply at the current sales pace.

"We have a tight inventory situation—whatever is coming on the market is moving very fast," said Lawrence Yun, NAR's chief economist.

The national median sale price for a previously owned home last month was $239,700, up 4.7% from a year earlier and the highest figure on record. Home prices are rising faster than wages across much of the U.S.

"One really has to ask a question about affordability," Mr. Yun said.

Existing homes make up roughly 90% of the housing market. In 2015, existing-home sales came in at a pace of 5.25 million, according to NAR, the highest level since 2006.

NAR predicts the pace of existing-home sales to rise further this year. Before Wednesday's release, the group was forecasting a 3% gain to 5.41 million.

The rejuvenated housing market has provided a boost to the economy, helping offset a slowdown in business spending and a downturn in the energy sector.

News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.

Write to Jeffrey Sparshott at jeffrey.sparshott@wsj.com and Josh Mitchell at joshua.mitchell@wsj.com

(END) Dow Jones Newswires

June 22, 2016 10:25 ET (14:25 GMT)

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