WASHINGTON, June 24 (Reuters) - Sales of new U.S. single-family homes unexpectedly fell in May, likely as higher mortgage rates and prices continued to sideline potential buyers from the housing market.

New home sales dropped 7.3% to a seasonally adjusted annualized rate of 580,000 units last month, the Commerce Department's Census Bureau said on Wednesday. New home sales, which are counted at the closing of a contract, account for a small share of U.S. home sales and tend to be volatile on a month-to-month basis. They declined 6.8% year-over-year in May.

The median new house price of $424,900 in May was little changed from a year earlier. 

Mortgage rates have risen as the U.S.-led war with Iran drove up oil prices, boosting inflation and Treasury yields. The rate on the popular 30-year fixed-mortgage has increased by about 50 basis points since the conflict started at the end of February, data from mortgage finance agency Freddie Mac showed. It averaged 6.47% last week.