By Laura Kusisto and Sarah Chaney 

WASHINGTON -- Sales of previously owned U.S. homes fell in June and prices jumped as strong demand overwhelmed a pinched supply of available homes.

Existing home sales fell 1.8% in June from the previous month to a seasonally adjusted annual rate of 5.52 million, the National Association of Realtors said Monday.

The median sales price in June hit a record high of $263,800, up 6.5% from a year earlier. Adjusted for inflation, prices remained about 9% below the 2006 peak.

Sales have essentially been flat since March, when home purchases reached the highest level since 2007. A number of indicators suggest demand is surging due to a strong economy and millennials entering the housing market in force for the first time.

But severe supply shortages are depressing sales.

"The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines, " said NAR Chief Economist Lawrence Yun.

There was a 4.3-month supply of homes on the market at the end of the month, down from 4.6 months a year earlier.

Existing home sale have been bumpy throughout the critical spring selling season. Sales rose modestly in May but declined in April, according to NAR.

First-time buyers are looking to make purchases, according to economists and recent housing-market data, but are finding few affordably priced homes. Owners, meanwhile, have been more inclined to stay put and renovate rather than brave bidding wars and prices that are significantly higher than what they paid a few years ago.

"The musical chairs phenomenon of people not wanting to actually list their own home because they don't want to be buyers again means that they have to make their own homes work," said Svenja Gudell, chief economist at home listings site Zillow.

First-time buyers accounted for 32% of sales in June, down slightly from 33% both in May and a year ago. NAR said the annual share of first-time buyers in 2016 was 35%, a significant improvement from recent years.

Foreign buyers also are putting pressure on demand. NAR revealed a surprising jump in Canadians buying U.S. properties in the year ending in March. In all, foreign buyers and recent immigrants purchased $153 billion of residential property in the U.S. in the year ended in March, a nearly 50% jump from a year earlier, according to a National Association of Realtors report released Tuesday. Foreigners purchased roughly 10% of existing U.S. homes, compared with 8% a year earlier.

Construction is showing signs of improvement, which could begin to ease supply shortages in the next year or so. Housing starts rose 8.3% in June from the previous month to a seasonally adjusted annual rate of 1.215 million, the Commerce Department said last week.

News Corp, owner of The Wall Street Journal, operates Realtor.com under license from the National Association of Realtors.

Write to Laura Kusisto at laura.kusisto@wsj.com and Sarah Chaney at sarah.chaney@wsj.com

(END) Dow Jones Newswires

July 24, 2017 11:19 ET (15:19 GMT)

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