Sales of new U.S. single-family homes unexpectedly fell in July to a nine-month low in a sign the housing market was cooling and could give less support to the overall economy.

The Commerce Department said on Thursday new home sales decreased 1.7 percent to a seasonally adjusted annual rate of 627,000 units last month, the lowest level since October 2017. June's sales pace was revised up to 638,000 units from the previously reported 631,000 units.

Economists polled by Reuters had forecast new home sales, which account for about 10 percent of housing market sales, rising to a pace of 645,000 units in July.

New home sales are drawn from permits and tend to be volatile on a month-to-month basis. They increased 12.8 percent from a year ago. Housing market data has weakened in recent months, with home resales declining in July for a fourth straight month.

The sector has been plagued by rising building material costs and shortages of land and labor, which have put a squeeze on the supply of houses available for sale and kept house prices elevated.

Though the moderation in housing is largely driven by supply constraints, there are concerns that persistent weakness will eventually spill over to the broader economy. The housing market has underperformed the economy so far this year.

New home sales in the South, which accounts for the bulk of transactions, declined 3.3 percent in July. Sales rose 10.9 percent in the West and 9.9 percent in the Midwest. They tumbled 52.3 percent in the Northeast to their lowest level since September 2015.

The median new house price rose 6.0 percent to $328,700 in July from June. There were 309,000 new homes on the market in July, the most since March 2009 and up 2.0 percent from June.