Discounting Street projections of a plunge in housing activity, new home sales rose in May for the third consecutive month - reaching the highest reading of the year thus far. In terms of regions, the South posted the best results, rising to near last year's peak. The West and the Midwest increased somewhat but remained moderate, while the Northeast fell to the lowest level in over a year.

The increase is not really surprising, according to RBS Greenwich Capital Chief Economist Stephen Stanley. "It has been our contention that housing demand would pull back gradually but remain at generally healthy levels by historical standards as long as economic fundamentals (mortgage rates/ income growth) were supportive," he said in a report released last week. "This scenario seems to be playing out, as home sales have dropped from last year's unsustainable pace but remain high by historical standards."

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