Sales of new homes in May climbed to the second highest level in history, but the median sales price fell sharply, the government reported Friday.

The Commerce Department (search) said that sales of new single-family homes rose by 2.1 percent last month to a seasonally adjusted annual rate of 1.3 million homes. But the median sales price dropped 6.5 percent to a median $217,000, the point at which half the homes sold for more and half for less.

The housing market has been red-hot this year with demand being driven by mortgage rates (search) that have hovered near historic lows. However, the surge in demand has raised concerns that a speculative fever is creating a housing bubble similar to the stock market bubble that burst in early 2000.

The strong new home sales (search) followed a report Thursday that sales of previously owned homes totaled 7.13 million units at an annual rate in May, a slight decline from the record April pace, but still the second fastest sales rate on record for existing homes. The median sales price of existing homes continued rising in April to hit a record of $207,000.

The increase in sales of new homes was led by a 22.9 percent jump in sales in the Midwest, which rose to an annual rate of 268,000 units. Sales were also up in the West, rising by 1.7 percent to an annual rate of 361,000 units. However, sales fell by a sharp 24.5 percent in the Northeast to an annual rate of 74,000 units. Sales were also down in the South by 0.8 percent, to an annual rate of 595,000 units.