New orders for durable goods hit their lowest level in a year in May, defying Wall Street's expectations, while the housing market stayed hot.

The Census Bureau reported Wednesday that new orders for durable goods fell 0.3% in May to $168.33 billion. Economists had anticipated a 1% rise in orders, according to Briefing.com. Orders had fallen 2.4% in April. Orders for durable goods -- manufactured items meant to last more than three years, such as cars and appliances -- now stand at their lowest level since June 2002.

Orders for defense capital goods led declines, dropping 13.8%, reflecting an end to war in Iraq. Excluding defense goods, orders for durable goods overall would have increased by 0.3%.

Having declined for 27 of the past 28 months, inventories for manufactured durable goods skidded 0.2% to $262.7 billion in May, following a 0.1% decrease in April.

Meanwhile, new-home sales set a record, soaring 12.5% in May to a seasonally adjusted annual rate of 1.157 million, the Census Bureau said. The previous record of 1.057 million was set in September 2002. New-home sales had risen 1% to a 1.028 million annual rate in April.

Existing-home sales climbed 1.2% -- their third-highest monthly pace on record -- to a 5.92 million annual rate from a revised 5.85 million rate in April, according to the National Association of Realtors.

Record-low mortgage rates and rising real-estate prices have helped the housing sector weather the economic storm over the last several years.

"The pace of home sales so far this year has been higher than projected, and we still expect sales activity to ease a little but to end this year with a new annual record," said NAR Chief Economist David Lereah.

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