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US New Home Sales Surged in May

FILE - A sign advertising new homes is posted at a housing development in Dublin, California.
New home sales surged sharply in the U.S. in May, up the most in 22 years.

The Commerce Department said Tuesday that new house purchases reached an annualized pace of 504,000 last month, a gain of more than 18 percent over April and the biggest monthly advance since 1992. It said the average sales price was about $319,000.

A report a day earlier also showed a pickup in existing home sales. Together, the two reports signal that the U.S. housing market, an important indicator in the world's largest economy, is gaining strength and recovering from the depths of the country's economic downturn in 2009.

Officials at the U.S. central bank, the Federal Reserve, say the U.S. economy now is steadily improving, advancing from a one percent contraction recorded from January to March during a harsh winter.

The government is set Wednesday to give another estimate of the economy's first quarter performance, with private economists predicting it dropped even more than estimated.