Economists surveyed by The Wall Street Journal had expected sales to drop 1 percent to a seasonally adjusted annual rate of 615,000.
New home sales increased 0.5 percent on a year-on-year basis. April's sales drop came after three straight months of increases.
Shrinking labor market slack, marked by a 4.4 percent unemployment rate, is improving employment opportunities for young Americans, helping to underpin demand for housing.
The housing market also continues to be supported by historically low mortgage rates, with the 30-year fixed mortgage rate hovering just above 4.0 percent.
But rising building material costs as well as shortages of lots and labor have left builders struggling to meet demand, keeping house prices elevated. A report last week showed homebuilding fell for a second straight month in April, hitting its lowest level in five months.
In April, new single-family homes sales fell 7.5 percent in the Northeast region. Sales plunged 26.3 percent in the West to their lowest level since October 2015. They fell 4.0 percent in the South and declined 13.1 percent in the Midwest.
The inventory of new homes on the market increased 1.5 percent to 268,000 units last month, the highest level since July 2009. Still, new housing stock remains less than half of what it was at its peak during the housing boom in 2006.
At April's sales pace it would take 5.7 months to clear the supply of houses on the market, up from 4.9 months in March.
A six-month supply is viewed as a healthy balance between supply and demand.
— CNBC.com contributed to this report.