FILE PHOTO: Construction worker builds a single family home in San Diego Thomson Reuters WASHINGTON (Reuters) - New U.S. single-family home sales unexpectedly fell in July, dropping to their lowest level in seven months, which could raise concerns of a slowdown in the housing market recovery.

The Commerce Department said on Wednesday new home sales

tumbled 9.4 percent to a seasonally adjusted annual rate of 571,000 units last month, the lowest level since December 2016. The percentage drop was the largest since August 2016.

June's sales pace was revised up to 630,000 units from the previously reported 610,000 units. Home sales in May also were not as weak as previously reported, taking some of the sting from July's report. New home sales are volatile month-to-month and are drawn from building permits

Economists polled by Reuters had forecast new home sales,

which account for 9.4 percent of overall home sales, increasing 0.3 percent to a pace of 612,000 units last month. Sales were down 8.9 percent on a year-on-year basis.

Coming on the heel of data this month showing a plunge in both housing starts and permits in July, the unexpected decline in new home sales suggests the housing market could be cooling.

The housing market is being hampered by a shortage of properties, land and labor, which are driving up home prices.

Housing weighed on the economy in the second quarter, subtracting nearly three-tenths of a percentage point from gross domestic product growth. Economists expect a modest rebound in housing activity in the third quarter.

The housing market remains underpinned by a strong labor market, which is near full employment.

In July, new single-family homes sales fell in the Northeast, South and West. They rose in the Midwest.

The inventory of new homes on the market rose 1.5 percent to 276,000 units, the highest level since June 2009. Still, new housing stock is less than half of what it was at its zenith during the housing bubble.

At July's sales pace it would take 5.8 months to clear the supply of houses on the market, up from 5.2 months in June.

A six-month supply is viewed as a healthy balance between supply and demand.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)