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Purchases of new homes rose in May to the highest level in seven years, signaling the industry is gaining momentum heading toward the second half of the year.

Sales climbed 2.2% to a 546,000 annualized pace, exceeding all forecasts in a Bloomberg survey of economists and the most since February 2008, Commerce Department data showed Tuesday in Washington. Readings for February through April were revised up.

Stronger employment and income prospects are bolstering would-be home buyers, allowing them to take advantage of relatively cheap borrowing costs even as home prices appreciate. The sales gains indicate residential real estate should withstand increases in borrowing costs as the Federal Reserve prepares to start tightening policy later this year.

“People are feeling more secure about their jobs, and when you’re feeling more secure about your job, you’re more likely to put down roots and buy a home,” Mark […]

Almost seven years after the financial crisis, bond investors are rediscovering their appetite for new debt tied to the U.S. housing market.

Issuance of home-loan securities that don’t have government backing has accelerated this year to more than $32 billion from $18 billion a year ago, according to data compiled by Bloomberg and Bank of America Corp. This time around, investors are mainly buying types of bonds that weren’t around when the debt helped spark the crash, such as securities tied to defaulted mortgages and rental homes.

The recovery in housing is luring investors back to a market that unraveled amid soaring defaults and tumbling home prices. The revival is helping to reduce taxpayers’ risks and boost the profits of private-equity firms, real estate investment trusts and hedge funds — and is poised to do more to aid home buyers.

“The market’s healing,” said Chris […]