US home sales post second straight monthly drop; house prices accelerate

WASHINGTON (Reuters) — U.S. existing home sales unexpectedly fell in April as higher mortgage rates and house prices weighed on demand, dealing another setback to the housing market.

Though the report from the National Association of Realtors on Wednesday showed inventory increasing last month to a 2-1/2-year high entry-level homes remained scarce, accounting for the second straight monthly decline in sales.

The housing market has taken a step back after residential investment, which includes homebuilding, grew at its fastest pace in more than three years in the first quarter amid a resurgence in mortgage rates.

“Supply constraints are doing as much to hold back sales as demand-side weakness,” said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. “Existing home sales will probably tread water, or perhaps even edge down a bit further, over the next few months.”

Home sales slipped 1.9% last month to a seasonally adjusted annual rate of 4.14 million units. Economists polled by Reuters had forecast home resales would rise to a rate of 4.21 million units. Home resales are counted at the closing of a contract.

April sales likely reflect contracts signed in the prior two months when the average rate on the popular 30-year fixed-rate mortgage was hovering just below 7%.

Sales fell in all four regions. The average rate on the 30-year fixed-rate mortgage has struggled to break back below 7% after surging to more than a five-month high of 7.22% in early May, data from mortgage finance agency Freddie Mac showed.