By Eric Morath

WASHINGTON -- Sales of previously owned homes slipped in July, a sign the U.S. housing-market recovery could be uneven as limited inventory and rising prices put purchases out of reach for some Americans.

The pace of existing home sales decreased 3.2% last month from June to a seasonally adjusted rate of 5.39 million, the National Association of Realtors said Wednesday. It was the first time sales had decreased since February.

Economists surveyed by The Wall Street Journal had expected a July sales pace of 5.52 million. Sales for June were unrevised at 5.57 million, the highest annual rate of the expansion.

From a year earlier, July sales were down 1.6%, but the pace remains near postrecession highs.

The data suggests rapidly rising prices and limited inventory is cooling sales.

Demand is greater than supply, said Amherst Pierpont Securities economist Stephen Stanley, "which means sales are not rising as much as they are capable of but prices are rising at a faster than sustainable clip."

Wednesday's report showed it would take 4.7 months to exhaust the supply of existing homes on the market at the end of July. Supply has fallen from a year earlier for 14 straight months. Total housing inventory at the end of July decreased 5.8% from a year ago to 2.13 million.

The share of first-time buyers was 32% in July, down slightly from June, NAR said.

News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the NAR.

The latest figures indicate the housing market could be challenged to repeat the strong first half of 2016. Historically low mortgage interest rates, improving income growth and steady job creation have supported buying of both new and existing homes.

The average rate for a 30-year fixed rate mortgage was 3.48% at the end of July, down a half-percentage point from a year earlier, according to Freddie Mac.

So far this year, existing home sales are trending near the pace recorded just before the recession began. Still, the pace is well below the peak reached in 2005 when more than 7 million properties were sold.

The Commerce Department said Tuesday that new homes, just 10% of the market, sold at the best pace since 2007 in July. But that same report showed availability of new homes was at a three-year low. And in some markets, with especially low unemployment, inventory is even tighter.

If builders are unable to increase supply, prices of existing homes will rise and that could slow demand because some would-be buyers will remain in the rental market.

"Home-price growth is outpacing rent growth," said Realtors economist Lawrence Yun, "which makes it difficult for renters to convert to buyers."

Rent for primary residences rose 3.8% from a year earlier in July, according to Labor Department data. Overall consumer prices were up 0.8%.

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

August 24, 2016 11:51 ET (15:51 GMT)

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