Housing Woes Still Building

Updated from 12:50 p.m. EDT

For those hoping that the U.S. housing market may be rebounding, several reports out Tuesday didn't do much to increase optimism.

The government's latest data showed that sales of new homes dropped at a steeper-than-expected rate in May, while inventories remained at historically high levels. Meanwhile, prices continued to fall, and homebuilder Lennar (LEN Quote) indicated that things could get worse before they get better.

Shares of homebuilders slid on the day. Lennar closed down 1.20, or 3.1%, to $37.55. Hovnanian(HOV Quote) fell 4.2% to $16.68, and Pulte(PHM Quote) fell 3.1% to 22.56.

According to the Census Bureau, sales of new homes came in at an annual rate of 915,000 units in May, below the revised April rate of 930,000 and down 15.8% from a year ago.

Economists expected a sales rate of 925,000 homes in May, according to estimates from Reuters.

Inventory for sale at the end of the month totaled 536,000 units, which represents 7.1 months of supply at the current sales rate. In April, inventories totaled a higher 542,000 units, but that only represented 7 months of supply because of the higher sales pace.

The median sales price of new houses sold in May fell to $236,100 from $238,200 a year earlier.

The government data comes on the heels of Monday's report from the National Association of Realtors that said inventories of existing homes for sale remained at the highest levels since 1992.

The large amount of inventory continues to put pressure on pricing. Another economic report out Tuesday, the S&P/Case-Shiller home price index, showed prices in 10 major U.S. cities fell 2.7% in April. The decline was the largest since late 1991, when the economy was in recession.