Jason Lange

WASHINGTON (Reuters) – U.S. home sales rose in May, boosted by lower interest rates for mortgages, giving a positive signal for the health of the U.S. economy.

The National Association of Realtors said on Friday existing home sales increased 2.5% to a seasonally adjusted annual rate of 5.34 million units last month. April’s sales pace was revised slightly higher to 5.21 million.

Economists polled by Reuters had forecast existing home sales rising to a rate of 5.25 million units in May. Existing home sales, which make up about 90 percent of U.S. home sales, dropped 1.1% from a year ago. That was the 15th straight year-on-year decrease in home sales.

Demand this years is being fueled by lower mortgage rates, which have dropped since the Fed suspended its three-year monetary policy tightening campaign. The Fed said this week that nearly half of its policymakers expect rate cuts this year due to concerns about the economic outlook.

The 30-year fixed mortgage rate has dropped to an average of 3.84% from more than a seven-year peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac.

The NAR said last year’s revamp of the U.S. tax code, which reduced the amount of mortgage-interest payments homeowners could deduct, was hurting sales of homes priced $1 million and above.

Reporting by Jason Lange; Editing by Paul Simao