New-home sales in May remained just above the levels of the 1991 recession, while high inventories levels continue to be a drag on any eventual housing recovery.

Sales of new homes totaled a seasonally adjusted annual rate of 512,000 in May, the Census Bureau said Wednesday, a rate that is roughly in line with economists' expectations. Sales were down 2.5% from April and down 40.3% from a year earlier.

In the 1991-92 recession, annual home sales hovered in the 400,000 to 600,000 range, according to data from Briefing.com. Sales reached a peak of 1.4 million annually during the recent housing boom.

Overall inventory levels fell slightly in May, but the month's supply ratio rose. Inventory totaled 453,000 units at the end of May, down from 461,000 in April. However, the weaker sales pace resulted in the inventory now amounting to 10.9 months of supply, up from 10.7 in April.

The median sales price was $231,000, which was the third lowest monthly level over the past year. (Prices hit between $227,700 and $227,800 in December and March.)

Homebuilder stocks rose slightly on the news, continuing their rally from the very strong performance on Tuesday, when Credit Suisse upgraded the sector to overweight saying a peak in inventory levels was likely in spring 2009.

Hovnanian

(HOV) - Get Report

rose 6.1% to $6.45,

Pulte

(PHM) - Get Report

rose 5.2% to $11.60, and

Centex

(CTX)

was up 5.5% to $15.98. The

SPDR S&P Homebuilders ETF

(XHB) - Get Report

was up 3.6% at $18.58.