New-home sales plunged 2.1 percent in May to a seasonally adjusted annual rate of 319,000 homes according to a Commerce Department report released Thursday.

The median sales price went up 2.6 percent from April to $222,600. That's 30 percent higher than the median home sales of price of previously owned homes.

Though new homes represent only about 20 percent of the overall home market, they have an outsize impact on the economy. Each new home creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.

Larger down payment requirements, stricter lending standards and high unemployment have prevented people from buying homes. also, one big reason is that many people are holding off thinking that prices have not reached the bottom.

In the Northeast, Sales fell nearly 27 percent and 3.5 percent in the West. But sales remained flat from April in the Midwest and increased 2.4 percent in the South.

The number of new homes on the market dropped again in May to its lowest level on record at 166,000 homes. At the current sales pace it would take a little more than 6 months to clear those homes off the market, which economists say is a healthy time frame.