BY SARAH PORTLOCK AND JOSH MITCHELL

Sales of previously owned homes surged in May to the highest level since late 2009 as prices rose, inventories remained tight and contracts closed at a brisk pace, offering the latest signs of a strengthening housing recovery.

Existing-home sales rose 4.2% in May from a month earlier to a seasonally adjusted annual rate of 5.18 million, the National Association of Realtors said Thursday. That is the highest figure since November 2009, when a tax credit was expiring, and was 12.9% above the same month a year earlier.

The results beat expectations. Economists surveyed by Dow Jones Newswires had forecast sales …