U.S. home resales fell to their lowest level in more than 1-1/2 years in March, but there were signs a recent downward trend that has plagued the housing market may be drawing to an end.
The National Association of Realtors said on Tuesday existing home sales slipped 0.2 percent to an annual rate of 4.59 million units.
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Though that was the lowest level since July 2012, sales were a bit stronger than economists had expected. There was also an increase in supply and more first-time buyers entered the market, key ingredients for a strengthening in activity.
A run-up in prices, which has reduced affordability, is also starting to moderate.
"The negative housing momentum, which was exacerbated by severe weather conditions during the winter months, may be starting to fade," said Gennadiy Goldberg, an economist at TD Securities in New York.
The March sales figures reflected purchase contracts signed in January and February, when the country was in the grip of an unusually cold and snowy winter. Sales peaked in July and have declined in seven of the last eight months.
While the terrible weather has accounted for some of the slump, a rise in mortgage rates and home prices, and a dearth of properties on the market, also sidelined potential buyers.
Compared to March last year, sales were down 7.5 percent.
Minutes of the Federal Reserve's March 18-19 policy meeting noted the softening in housing activity, with some officials saying the jump in mortgage rates last year might have produced a "larger than expected reduction in home sales."
The 30-year fixed mortgage rate, which peaked at 4.49 percent in September, averaged 4.34 percent in March. A year ago it stood at 3.57 percent.
The Fed is dialing back the amount of money it pumps into the economy through monthly bond purchases and is not seen raising benchmark interest rates before the second half of 2015.
HOUSING TO WEIGH ON GROWTH
Residential construction has also cooled in recent months. Investment in home building was a drag on growth in the fourth quarter for the first time in three years, and it likely undercut gross domestic product in the first quarter as well.
"It's a small share of GDP, but the weakness in home sales was severe enough to be a material contributor to the slowing in GDP growth in the first quarter," said Ted Wieseman, an economist at Morgan Stanley in New York.
First-quarter growth is seen around a 1.5 percent annual pace, a sharp slowdown from the 2.6 percent rate logged in the fourth quarter of 2013.
While housing is lagging the economy's snap-back from a winter-induced lull, it could be close to finding a bottom.
Leading housing market indicators such as contract signings and mortgage applications are showing signs of stabilizing. Real estate brokers are also seeing some signs of a pickup in demand.
Real estate brokerage firm Redfin reported new listings across 19 markets rising in March on a year-ago basis.
"This first year-over-year growth in March in at least three years should help sales in the coming months in inventory-hungry and relatively affordable markets like Chicago, Philadelphia and Seattle," said Redfin economist Ellen Haberle.
"The number of new customers contacting Redfin has grown to an all-time high over the past several weeks, signaling that demand is there, but many buyers remain sitting on the sidelines until more options become available."
Buyers could soon have more options. The NAR said the inventory of unsold homes on the market rose 4.7 percent from February. With sales falling, the months' supply rose to an 11-month high of 5.2. A 6.0 months supply is normally considered as a healthy balance between supply and demand.
First-time buyers accounted for 30 percent of the transactions, the largest in a year and an increase from 28 percent in February. A market share of 40 percent to 45 percent for first-time buyers is considered by economists and real estate professionals as ideal.
With inventory still tight, the median price for a previously owned home rose 7.9 percent from a year ago to a six-month high. The pace of acceleration is, however, slowing.
A shortage of properties also means houses are being snapped up quickly. About 37 percent of homes sold in March were on the market for less than a month.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci)