New-home sales edged down 0.6% in May after rising during the previous two months and builders continued to trim their inventories of unsold homes.

"The housing market is gradually stabilizing, but showing no signs whatsoever of a vigorous rebound," said Mike Larson, real estate analyst at Weiss Research.

The U.S. Census Bureau reported that sales of new single-family homes fell to a 342,000 seasonally adjusted annual rate in May from a 344,000 rate in April.

Economists were expecting sales of 360,000 and the numbers are a "disappointment," Mr. Larson said. He noted that the results of previous months saw a downward revision by 32,000 units.

Meanwhile, builders have trimmed their inventories by 35% over the past 12 months but they still carrying 292,000 unsold homes, which represents a 10-month supply at the current sales pace.

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