Existing-home sales dropped 0.8% in June from May to a seasonally adjusted annual rate of 4.77 million, 8.8% behind the pace of June, 2010. The drop was driven by a 7% decline in the condo and coop sector, but prices ticked up a bit, the National Association of Realtors reported Wednesday.

Sales of existing single-family homes, however, were flat at a rate of 4.24 million in June, 7.4% below a year earlier. The median price for an existing single-family house was up 0.6% to $184,600.

Wall Street was expecting an annual pace of 4.92 million.

The median price for all housing types was $184,300 in June, up 0.8% from June 2010.

Prices continued to be skewed downward by distressed sales, which are frequently in less desirable locations and of interest only to investors.Foreclosures and short sales accounted for 30% of sales in June, down marginally from 31% in May and 32% in June 2010. All-cash transactions accounted for 29% of sales in June, also down marginally from 30% in May but up from 24% in June 2010. Investors made up 19% of the market, the same as May but up from 13% last June.

First-time buyers comprised 31% of the market, down from 36% in May and 43% in June 2010, when the federal homebuyer tax credit was in place. Repeat buyers took a 50% share of activity, up from 45% in May.

Condo and coop sales fell to a seasonally adjusted annual rate of 530,000 in June from 570,000 in May, 18.0% below a year earlier. The median existing condo price was $182,300 in June, up 1.8% from June 2010.

Total for-sale inventory at the end of June rose 3.3% to 3.77 million, a 9.5-month supply at the current sales pace, up from a 9.1-month supply in May.

Regionally, existing-home sales in the Northeast fell 5.2% to an annual pace of 730,000 in June, 17% below June 2010. The median price in the Northeast was $261,000, up 3.1% from a year earlier. Existing-home sales in the Midwest rose 1% to a pace of 1.04 million, 14% below last June. The median price down 5.3% year-over-year to $147,700.

Sales in the South rose 0.5%t to an annual level of 1.86 million in June, 5.6% below June 2010, and the median price was essentially flat with a drop of 0.1% to $159,100. The West dropped 1.7% to an annual pace of 1.14 million, 2.6% below last June with the median price up 9.5% to $240,400.

Though the adjusted annual pace fell short of Wall Street expectations, the lackluster performance was not a big surprise given that the Realtor's Pending Home Sales Index, which foretells sales for the coming 60-90 days, was down in April but up in May. The Realtor Group chalked up part of the decline to a sudden spike in contract cancellations, however.

"Home sales had been trending up without a tax stimulus, but a variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month," said NAR Chief Economist Lawrence Yun. "The underlying reason for elevated cancellations is unclear, but with problems including tight credit and low appraisals, 16% of NAR members report a sales contract was cancelled in June, up from 4% in May, which stands out in contrast with the pattern over the past year."

Michael Rehaut, home-building analyst at J.P. Morgan, took the data in stride. In a research note, he wrote, "We believe these data points continue to demonstrate a stabilizing housing market, and continue to expect a stable to slightly improving trend over the next 12 months. Moreover, we note that existing homes for sale rose 3% sequentially to 3.77 mil., nearly in-line with its historical seasonal 2% rise for the month; overall, we believe supply remains at manageable levels, as existing homes for sale are now 18% below peak levels and foreclosures continue to liquidate at a moderate pace."

Adam Rudiger at Wells Fargo saw more ominous signs in the report. In his note, he wrote, "(1) While normally, inventory rises in June versus May, the 3.3% sequential increase exceeded the average (since 1999) uptick of 1.5%. Further, at 3.77MM units, total inventory stands at its highest level of 2011. Since public homebuilders consider existing inventory their primary competition, currently, we see this incessantly high inventory as a negative for public new homebuilders. (2) Through the first six months of 2011, on average, first-time buyers represented 33% of monthly existing home buyers versus 44% in 2010. Given the move many public homebuilders have made over the last several years to focus on first-time buyers, we also view the decline in first-time buyers in the housing market as a modest negative for most public builders. (3) On average, all-cash buyers represented 32% of monthly sales in 2011 versus 26% last year (despite a 18-bp decline in the average 30-year Freddie Mac mortgage rate). We view this partially as an indicator of a still-difficult mortgage financing environment. (4) The NAR said that cancellations inexplicably increased from 4% in May to 16% in June, a negative sign for the overall housing market, in our opinion."