Sales of new U.S. single-family homes fell sharply in June and the prior month's data was revised to show less robust growth, suggesting the housing market would struggle to regain momentum.
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The Commerce Department said on Thursday that sales dropped 8.1 percent, the largest decline since July 2013, to a seasonally adjusted annual rate of 406,000 units.
May's sales pace was revised to 442,000 units from the previously reported 504,000 units.
Economists polled by Reuters had forecast new home sales at a 479,000-unit pace last month. Compared to June of last year, sales were down 11.5 percent.
A run-up in mortgage rates, as well as a shortage of properties for sale, pressured home sales late last year, raising concerns that a weak housing market could undercut economic growth.
Though housing appears to be on the mend with mortgage rates well off their September peak and job growth gathering momentum, the sector will probably continue to lag the overall economy.
Last month, new home sales fell in all four regions, declining by 20 percent in the Northeast.
The inventory of new houses on the market rose 3.1 percent to 197,000 units, the highest number since October 2010. At June's sales pace it would take 5.8 months to clear the supply of houses on the market, the highest since October 2011. (Reporting by Lucia Mutikani; Editing by Paul Simao)