U.S. home sales unexpectedly fell in April amid persistent weakness in the lower-priced segment of the market, which has experienced an acute shortage of properties.
The National Association of Realtors said on Tuesday existing home sales fell 0.4% to a seasonally adjusted annual rate of 5.19 million units last month. March's sales pace was unrevised at 5.21 million units.
Economists polled by Reuters had forecast existing home sales rising 2.7% to a rate of 5.35 million units in April. Existing home sales, which make up about 90 percent of U.S. home sales, dropped 4.4% from a year ago. That was the 14th straight year-on-year decrease in home sales.
According to the NAR, there was a 10 percent drop from a year earlier in sales of houses priced $100,000 and below. The Realtors group said there was strong demand in this market segment, but not enough homes available for sale. The NAR said last year's revamp of the U.S. tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was hurting sales of homes priced $1 million and above.
Demand is being fueled by lower mortgage rates. The 30-year fixed mortgage rate has dropped to an average of 4.07% from a more than seven-year peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. This follows a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.
Housing supply remains tight, especially at the lower end of the market because of land and labor shortages. The government reported last week that permits to build single-family homes fell for a fifth straight month in April, touching their lowest level since November 2016.
A survey last week also showed that single-family home builders were the most optimistic in seven months in May, they complained that they "continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability."
Last month, existing home sales fell in the Northeast and South. They were unchanged in the Midwest and rose in the West.
There were 1.83 million previously owned homes on the market in April, up from 1.67 million in March and 1.8 million a year ago. At April's sales pace, it would take 4.2 months to exhaust the current inventory, up from 3.8 months in March.
A six-to-seven-month supply is viewed as a healthy balance between supply and demand. The median existing house price increased 3.6% from a year ago to $267,300 in April.
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