Prices and sales of new homes dropped again in May, the government reported Wednesday. In the latest report of the, the Commerce Department sales of newly built, single-family homes fell 2.5 percent in May to a seasonally adjusted annual rate of 512,000 units. This just countered the gain in April.

The report on new home activity in May followed reports Tuesday that showed record home price drops in April, indicating the nation’s housing slump is not only deepening but also widening to include previously untouched parts of the country.

New homes were sold at a seasonally adjusted annual rate of 512,000 units in May, down 2.5 percent from the April level and 40 percent from last year's. The median price of a new home sold last month fell to $231,000, down 5.7 percent from last month. The figure was down 26 percent from a year ago, when the median price of a new home was $311,300.

The department's report indicated that the inventory of new homes for sale fell 1.7 percent in May to 453,000 units, which is a 10.9-month supply at the current sales pace.

Regionally, in May, new home sales were down in the West by 11.6 percent, 7.9 percent in the Northeast and 11.6 percent in the West. Sales gained 5.1 percent in the Midwest and rose a marginal 0.4 percent in the South.

The inventory of unsold homes increased to 10.9 months in May thus taking a much longer time to exhaust the current supply of unsold homes. Because of the unusually high inventories, economists believe that home prices are likely to continue to fall until the spring of 2009.