Sales of existing single-family homes increased 3.6% last month to their highest level in more than 5 1/2 years, the California Assn. of Realtors reported. Previously occupied homes were sold at a 514,226-unit annual rate in May, up from a 496,500-unit yearly pace in April and 12.4% above the 457,496-unit annual sales rate in May, 1985. The May sales gain followed a 27.8% surge in resales in April. May's sales rate was the best in California since October, 1980, when homes were sold at a 571,670-unit annual rate.