Sales of new U.S. single-family homes fell to a one-year low in May as the median price of newly built houses soared amid expensive raw materials, including framing lumber.

The second straight monthly decline in sales reported by the Commerce Department on Wednesday was the latest indication that the tailwind from the COVID-19 pandemic could be subsiding. Single-family housing benefited from migration from cities as millions of Americans sought more spacious accommodations for home offices and schooling during the pandemic.

"New home sales along with existing home sales suggest home buying activity is past its peak," said Chris Rupkey, chief economist at FWDBONDS in New York. "We don't know what is going to happen when the stay-at-home economy shifts to going back to the office."

New home sales dropped 5.9 percent to a seasonally adjusted annual rate of 769,000 units last month, the lowest level since May 2020. April's sales pace was revised down to 817,000 units from the previously reported 863,000 units. The median new house price jumped 18.1 percent from a year earlier to $374,400 in May.

Economists polled by Reuters had forecast new home sales, which account for 11.7 percent of U.S. home sales, would be at a rate of 870,000 units in May.

New home sales are considered a leading housing market indicator as they are recorded when contracts are signed. The drop hinted at some easing in demand. Applications for loans to purchase homes have fallen this year and housing market surveys on potential buyers have also softened.

Last month's decline was concentrated in the populous South, where sales tumbled 14.5 percent. Sales, however, rose in the Northeast and West. They were unchanged in the Midwest.

"While we remain optimistic about housing demand for the year as whole, we may see a few more months of underwhelming sales," said Mark Vitner, a senior economist at Wells Fargo in Charlotte, North Carolina. "Several builders have reported lighter prospective buyer traffic in recent weeks, particularly in what had been some of the hottest housing markets in the South and Mountain West."