The National Association of Realtors said on Monday existing home sales dropped 1.8 percent to a seasonally adjusted annual rate of 5.52 million units last month. May's sales pace was unrevised at 5.62 million units.
Economists polled by Reuters had forecast sales falling 1.0 percent to a 5.58 million-unit rate. Sales were up 0.7 percent from June 2016. An acute shortage of properties has hampered monthly sales. The shortage of properties has led to bidding wars, which have culminated in house price increases outpacing wage gains.
Last month, the number of homes on the market slipped 0.5 percent to 1.96 million units. Supply was down 7.1 percent from a year ago. Housing inventory has dropped for 25 straight months on a year-on-year basis. As a result, the median house price jumped 6.5 percent from a year ago to an all-time high of $263,800 in June.
It was the 64th straight month of year-on-year price increases. The PHLX index of housing stocks .HGX fell, underperforming a broadly weaker U.S. stock market. Prices for U.S. Treasuries bonds slipped while the U.S. dollar rose slightly against a basket of currencies after the data was published.
Homebuilders are struggling to plug the inventory gap amid rising costs of lumber. Homebuilding is also being constrained by shortages of labor and land. A report last week showed housing starts rebounding 8.3 percent to a 1.22 million-unit pace in June, but still below their historic average of 1.5 million units, a rate realtors say would eliminate the housing shortage.
The two reports suggest that housing subtracted from gross domestic product in the second quarter after contributing almost half a percentage point to the economy's annualized 1.4 percent growth pace in the first three months of the year.
Last month, sales fell in the Northeast, West and South regions, but rose in the Midwest. At June's sales pace, it would take 4.3 months to clear the stock of houses on the market, up from 4.2 months in May. A six-month supply is viewed as a healthy balance between supply and demand.
Houses typically stayed on the market for 28 days last month, down from 34 days a year ago. Houses spent fewer days on the market in Seattle, Salt Lake City, San Jose, San Francisco and Denver. Demand for housing is being driven by a tight labor market, marked by a 4.4 percent unemployment rate, which is boosting employment opportunities for young Americans.
But the tight labor market has not spurred faster wage growth. Annual wage growth has struggled to break above 2.5 percent, sidelining first-time home buyers, whose share of home sales has barely shifted.
They accounted for 32 percent of transactions last month, well below the 40 percent share that economists and realtors say is needed for a robust housing market.