The Commerce Department said today that sales of new single-family homes fell 2.5% in May to a seasonally adjusted annual rate of 512,000. Economists were expecting a sharper decline to 510,000 from April's level of 525,000. On a year-over-year basis, new home sales are down more than 40%. Home prices also dropped; the median sales price in May fell 5.7% to $231,000 from the same month a year ago.

Inventories are also waning. The number of homes on the market hit a 3-year low of 453,000. At May's sales pace, this represents a 10.9-month supply up slightly from April's 10.7-month inventory.

On a regional basis, the West was hit hardest. Sales fell 11.6% to a 26-year low of 114,000 annualized. Sales in the Northeast shed nearly 8% to 35,000. Gains were recorded in both the South and the Midwest, where sales rose by 0.4% and 5.1%, respectively.

In related news, the Mortgage Bankers Association said that mortgage applications fell last week by a seasonally adjusted 9.3%. Applications were down 25.3% from the year-ago period.

Home sales and mortgage applications are just a few of the many economic reports hitting the Street today. Investors have already been treated to the latest durable goods report, as well as our weekly crude inventories. Plus, check back with SchaeffersResearch.com later this afternoon for the latest interest-rate decision from the Federal Open Market Committee.