New-home sales rose 2.2 percent to an annual rate of 546,000 units, the Commerce Department reported, well above the analyst consensus estimate of 525,000. That marked the strongest sales pace since February 2008 when the economy was struggling amid the Great Recession.

Year-over-year, May new-home sales were up 19.5 percent. The strength in May sales came amid post-crisis pent-up demand that was helping tighten inventory on the housing market. The inventory of new homes on the market fell a tick to a 4.5-month supply according to the current sales pace. The median sales price of new houses sold in May was $282,800, down from $291,100 in April.

"Buyers likely took notice of the increase in 10-year Treasury yields that began at the very end of April. With mortgage rates heading higher, buyers signed contracts to take advantage of relatively low interest rates," said Briefing.com analysts in a research note. On Monday, the National Association of Realtors reported that May sales of existing homes, the lion's share of the housing market, accelerated by 5.1 percent to an annual pace of 5.35 million units, the strongest pace in more than five years.