U.S. home resales fell more than expected in February amid a persistent shortage of houses on the market that is pushing up prices and sidelining potential buyers.
The National Association of Realtors said on Wednesday existing home sales declined 3.7 percent to a seasonally adjusted annual rate of 5.48 million units last month.
January’s sales pace was un-revised at 5.69 million units, which was the highest level since February 2007. Economists polled by Reuters had forecast sales decreasing 2.0 percent to a pace of 5.57 million units last month.
“Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” said Lawrence Yun, the NAR’s chief economist.
Sales were up 5.4 percent from February 2016, underscoring the sustainability of the housing market recovery despite rising mortgage rates. In February, houses typically stayed on the market for 45 days, down from 50 days in January.
U.S. financial markets were little moved by the data as investors increasingly worried whether President Donald Trump would be able to push ahead with his pro-growth policies. The dollar fell against a basket of currencies and U.S. stocks were trading mostly lower. Prices for U.S. government bonds fell.
The 30-year fixed mortgage rate is hovering at 4.30 percent.
Home loans could cost more after the Federal Reserve last week raised its benchmark overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent. The U.S. central bank has forecast two more rate hikes for 2017.
BUOYANT LABOR MARKET
Demand for housing is being buoyed by a labor market that is near full employment. But home sales remain constrained by the dearth of properties available for sale, which is keeping prices elevated.
While the number of homes on the market increased 4.2 percent to 1.75 million units last month, housing inventory remained close to the all-time low of 1.65 million units hit in December. Supply was down 6.4 percent from a year ago.
Housing inventory has dropped for 21 straight months on a year-on-year basis. With supply remaining tight, the median house price surged 7.7 percent from a year ago to $228,400 in February. That marked the 60th consecutive month of year-on-year price gains.
Builders have been unable to fill the housing inventory gap, citing rising prices for materials, higher borrowing costs, and shortages of lots and labor.
Lennar Corp, the second-largest U.S. homebuilder, reported on Tuesday a drop in quarterly gross margin as the company struggled with higher land and construction costs.
The Florida-based builder, however, sold 5,453 homes in the first quarter ended Feb. 28, up from 4,832 homes in the year-earlier period, and reported a 12 percent jump in orders.
The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to alleviate the chronic shortage. Housing starts are running above a rate of 1.2 million units and completions around a pace of 1 million units.
At February’s sales pace, it would take 3.8 months to clear the stock of houses on the market, up from 3.5 months in January. A six-month supply is viewed as a healthy balance between supply and demand. Though higher prices are increasing equity for homeowners and might encourage some to put their homes on the market, they could be sidelining first-time buyers from the market. First-time buyers accounted for 32 percent of transactionslast month, well below the 40 percent share that economists and realtors say is needed for a robust housing market.
That was down from 33 percent in January but up from 30 percent a year ago.