The Commerce Department said Wednesday that sales of new homes fell 8.4 percent last month from May to a seasonally adjusted annual rate of 350,000. That's the biggest drop since February 2011.
Sales in the Northeast plunged 60 percent in June to the lowest level since November.
Nationwide, sales in May and April were revised much higher. June's sales pace is 15.1 percent higher than the same month last year. But sales remain well below the 700,000 annual rate that economists equate with healthy markets.
The housing market has started to show signs of recovery this year.
Builders are more confident and breaking ground on more homes. Mortgage rates are at record lows. And home prices nationwide have stabilized after losing a third of their value in the past six years. Sales of new and previously occupied homes have risen, although the increases have been choppy.
Sales of previously occupied homes fell in June to their lowest level since October. But sales were up 4.5 percent from a year ago, evidence that a modest recovery is still under way.
One trend that is holding back sales has been low inventories. There were 144,000 new homes for sale in June, just above May's 143,000 - the lowest on records dating back to 1963. At the current sales pace, it would take 4.9 months to exhaust the June supply. A six-month supply is generally considered healthy by economists.
The reduced inventory is pushing up overall home prices, which have turned up in recent months. The median price of a new home, however, fell 1.9 percent in June from May to $232,600.
Low inventories are also spurring more building. Builders broke ground last month on the most new homes and apartments in nearly four years. And permits to build single-family homes rose to the highest level since March 2010. Surveys also show that builders are more confident in the market, partly because they are seeing more interest from potential buyers.
However, many people are still having difficulty qualifying for home loans or can't afford the larger down payments that are being required by banks. That's likely holding back sales.
Though new homes represent less than 20 percent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to statistics compiled by the National Association of Home Builders.
Economists expect housing will add to economic growth this year for the first time since 2005. But home construction and remodeling have become such a small part of the economy that the increase will likely have only a modest impact.
Other than housing, the economy has been weakening. Americans have cut their spending at retail stores for three straight months, the longest stretch of cutbacks since the recession. A survey earlier this month found that manufacturing activity contracted in June for the first time in nearly three years.
And hiring is slowing. Employers added an average of only 75,000 jobs a month from April through June. That's much lower than the average of 226,000 a month added in the first three months of this year.
On Friday, the government will issue its first estimate for economic growth in the April-June quarter. Economists have cut back on their forecasts in recent weeks, and now expect growth at an annual rate of only 1.5 percent. That's below the 1.9 percent pace in the first three months of the year.