WASHINGTON, June 25 (Reuters) – Sales of new U.S. single-family homes unexpectedly fell for a second straight month in May, suggesting lower mortgage rates had yet to provide a boost to the struggling housing market.

The Commerce Department said on Tuesday new home sales dropped 7.8% to a seasonally adjusted annual rate of 626,000 units last month, the lowest level since December. April’s sales pace was revised up to 679,000 units from the previously reported 673,000 units.

Economists polled by Reuters had forecast new home sales, which account for about 10.5% of housing market sales, would rise 1.9% to a pace of 680,000 units in May.

New home sales are drawn from permits and tend to be volatile on a month-to-month basis. Sales fell 3.7% from a year ago.

The median new house price declined 2.7% from a year ago to $308,000 in May.

The housing market has remained sluggish even as mortgage rate have dropped, with builders continuing to complain about land and labor shortages. Housing data have been mixed.

Reports last week showed single-family starts dropped in May, but building permits for this market segment rose after five straight monthly declines and home resales rose solidly. Sentiment among builders dipped in June.

The 30-year fixed mortgage rate has tumbled to around 3.84% from near an eight-year high of 4.94% in November. Further declines are likely after the Federal Reserve last week signaled interest rate cuts beginning as early as July because of growing risks to the economy and low inflation.

The housing market has been a drag on economic growth for five straight quarters.

New home sales in the South, which accounts for the bulk of transactions, jumped 4.9% in May to the highest level since July 2007. Sales in the Midwest rose 6.3%. But sales plunged 35.9% in the West and tumbled 17.6% in the Northeast.

There were 333,000 new homes on the market last month, up 0.3% from April. At May’s sales pace it would take 6.4 months to clear the supply of houses on the market, up from 5.9 months in April. About two-thirds of the houses sold last month were either under construction or yet to be built.