The National Association of Realtors said on Monday existing home sales dropped 4.8 percent to an annual rate of 5.31 million units.
Economists polled by Reuters had forecast a 5.51 million-unit pace of home sales last month. Sales were up 6.2 percent from a year ago.
The decline in August might be due to rising prices shutting out potential buyers, said Lawrence Yun, the NAR's chief economist. Home sales fell most in America's South and West, areas which had recently seen the fastest price gains, he said.
Nationwide, the median home price fell slightly in August to $228,700. That was still up 4.7 percent from a year earlier, but left the year-over-year rate at its lowest since August 2014. Prices in the West were up 7.1 percent from a year earlier.
A string of strong reports on the U.S. housing market have supported the view that the U.S. economy is building up steam and closing in on the point when the Federal Reserve will hike interest rates to keep it from overheating.
The pace of sales in July remained at an eight-year high even after being revised slightly lower on Monday.
Shares in home builders held onto gains following the release of the data, with the PHLX housing index up 0.8 percent. The U.S. stock market was also generally higher, and yields on U.S. government debt continued higher.
The housing market has been adding to quarterly economic growth although home sales and construction remain far below levels seen in the years before the 2007-09 recession.
Lennar Corp, the No.2 U.S. homebuilder by volume, reported better-than-expected quarterly profit and revenue on Monday as it sold more homes at higher prices.
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