WASHINGTON (Reuters) – U.S. home resales fell more than expected in April, weighed down by a chronic shortage of houses on the market that is keeping house prices elevated and sidelining prospective buyers.
The National Association of Realtors said on Wednesday existing home sales declined 2.3 percent to a seasonally adjusted annual rate of 5.57 million units last month.
Despite the decline, April’s sales pace was the fourth highest over the past 12 months. March’s sales pace was revised down to 5.70 million units, which was still the highest level since February 2007, from the previously reported 5.71 million units.
“Lack of supply moving through the seasonal ramp-up in sales in the spring selling season slowed sales rather than demand,” said Ted Wieseman, an economist at Morgan Stanley in New York.
Economists had forecast sales falling 1.1 percent to a 5.65 million-unit rate. Sales were up 1.6 percent from April 2016, also underscoring the housing market’s underlying strength.
While the number of homes on the market rose 7.2 percent to 1.93 million units from March, supply was down 9.0 percent from a year ago. Housing inventory has dropped for 23 straight months on a year-on-year basis.
As a result, the median house price increased 6.0 percent from a year ago to $244,800 in April, the highest level since June 2016. That was the 62nd straight month of year-on-year price gains.
With recent data showing a drop in home building and a plunge in new home sales in April, weak home resales suggest residential investment will probably make a small contribution to gross domestic product in the second quarter.
Residential investment added half a percentage point to the economy’s 0.7 percent annualized growth pace in the first quarter.
U.S. financial markets were little moved by the report as investors awaited minutes of the Federal Reserve’s May policy meeting later on Wednesday.
Houses typically stayed on the market for 29 days last month, the shortest period since the NAR started tracking the series in May 2011. That was down from 34 days in March and 39 days a year ago.
Demand for housing is being driven by a tight labor market, marked by a 4.4 percent unemployment rate, which is boosting employment opportunities for young Americans.
The housing market also remains 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 fill the inventory gap.
The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to eliminate the persistent shortage. Housing starts are running at about a rate of 1.2 million units and completions around a pace of 1 million units.
A separate report from the Mortgage Bankers Association on Wednesday showed applications for loans to purchase homes fell 1.0 percent last week.
Last month, sales fell in the Northeast, West and South regions, but rose in the Midwest.
At April’s sales pace, it would take 4.2 months to clear the stock of houses on the market, up from 3.8 months inMarch. A six-month supply is viewed as a healthy balance between supply and demand.
First-time buyers accounted for 34 percent of transactions last month, still well below the 40 percent share that economists and realtors say is needed for a robust housing market, but up from 32 percent a year ago.