Existing home sales in the U.S. unexpectedly decreased in the month of March, according to a report released Monday by the National Association of Realtors, which attributed the drop in sales to inventory constraints.
NAR said existing home sales fell 0.6 percent to an annual rate of 4.92 million in March after inching up by 0.2 percent to a downwardly revised 4.95 million in February.
The drop surprised economists, who had expected existing home sales to edge up to 5.03 million from the 4.98 million originally reported for the previous month.
Despite the unexpected monthly decrease, NAR noted that existing home sales are 10.3 percent higher than the 4.46 million-unit pace in March of 2012.
"Buyer traffic is 25 percent above a year ago when we were already seeing notable gains in shopping activity," said Lawrence Yun, NAR chief economist. "In the same timeframe housing inventories have trended much lower, which is continuing to pressure home prices."
"The good news is home construction is rising and low mortgage rates are continuing to keep affordability conditions at historically favorable levels," he added. "The bad news is that underwriting standards remain excessively tight, while renters are getting squeezed by higher rents."
The report showed that there were 1.93 million existing homes available for sale at the end of March, up 1.6 percent from 1.90 million at the end of February but down 16.8 percent compared to the same month a year ago.
Total housing inventory at the end of March represents 4.7 months of supply at the current sales pace compared to 4.6 months in February and 6.2 months in March of 2012.
"The inventory improvement last month results from a seasonal gain, but conditions continue to broadly favor sellers," Yun said.
He added, "We need a housing supply of over 6 months to have a generally balanced market between home buyers and sellers, but it's unlikely we'll get there without greater increases in housing construction."
The report also showed that the national median existing home price was $184,300 in March, up 6.4 percent from $173,200 in February and up 11.8 percent from $164,800 in the same month a year ago.
NAR said the year-over-year increase in March reflects the strongest growth since November 2005, when prices rose 12.9 percent year-over-year.
Tuesday morning, the Commerce Department is scheduled to release a separate report on new home sales. Economists expect new home sales to climb to an annual rate of 419,000 in March from 411,000 in February.
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