After climbing to its second-highest level in 9 years, sales of previously-owned homes in the U.S. tumbled more than forecasted last month. Low inventory levels continue to weigh on the housing market, limiting progress.
Closings on existing homes were down 7.1% to a three-month low, falling to an annual rate of 5.08 million. January’s pace reached 5.47 million, according to the National Association of Realtors.
The residential real estate market is struggling to grow as inventory levels remain scarce. With such a limited selection, prices are rising. Although mortgage rates are attractive, affordability is an issue for home buyers, particularly low-income and first-time buyers.
The news suggests that the market may not be as strong as economists had anticipated.
Sales of pre-existing homes in February declined in all four regions. The Northeast saw the biggest decline, falling 17.1%. Sales fell sharply in the Midwest as well, dropping 13.8%.
Economists speculate that a blizzard on the East Coast may be partly to blame for the decline in closings, but lack of inventory and high prices are bigger obstacles.
Home sales increased 6.4% in February compared to the previous year. The number of properties available on the market declined 1.1% from 1.9 million last year to just 1.88 million in February.
It would take approximately 4.4 months to sell all the homes on the market at the current pace. At the end of January, the pace was at 4 months, and 4.6 months in February of 2015. Homes are selling faster, however. The median market time for homes was 59 days in February compared to 64 days the previous month.
Limited inventory has boosted home values, which is hindering market growth. The median price of a previously owned home climbed to $210,800 last month, up from $201,900 in February 2015. High prices are keeping homes out of reach for first-time home buyers, which account for 30% of all purchases.