WASHINGTON (Reuters) - U.S. home sales dropped more than expected in November due to an ongoing shortage of properties for sale, despite the sector receiving an overall boost from the Federal Reserve's decision to cut interest rates this year.
The National Association of Realtors said on Thursday that existing home sales fell 1.7% to a seasonally adjusted annual rate of 5.35 million units last month. October's sales pace was downwardly revised to 5.44 million units.
Economists polled by Reuters had forecast existing home sales declining 0.2% to 5.44 million units.
The U.S. central bank's decision to lower borrowing costs three times this year to shield the economy from slowing global growth and the U.S.-China trade war has pushed down mortgage rates from 2018's multi-year highs.
The 30-year fixed mortgage rate has dropped more than 130 basis points since last November's peak to an average of 3.73%, according to data from mortgage finance agency Freddie Mac.
Existing home sales still rose 2.7% from one year ago, NAR said, the fifth straight month of year-on-year gains. Last week the Fed made clear it plans to leave rates unchanged for the foreseeable future with 13 of the 17 policymakers currently predicting rates holding steady through 2020.
Sales were mixed across the nation's four regions last month. They climbed 2.3% in the Midwest and rose 1.4% in the Northeast. In the South, they declined 3.9% and fell 3.5% in the West.
The housing market, which makes up about 3.1% of the economy, has been lifted this year by the drop in rates, but gains have been curbed by a persistent lack of properties for sale, which has inflated prices, as well as a shortage of land and labor.
There are some hopeful signs. A survey on Monday showed confidence among homebuilders jumped in December to the highest level since June 1999 and on Tuesday, data showed U.S. homebuilding increased more than expected in November and permits for future home construction surged to a 12-1/2-year high.
There were 1.64 million homes on the market last month, a decline of 5.7% compared to a year ago, NAR said. The median existing house price rose 5.4% from a year ago to $271,300 in November. It was the 93rd consecutive month of year-on-year price gains.
"America is facing a housing shortage," said Jessica Lautz, NAR's vice president of demographics and behavioral insights. "We need more home construction."
At November's sales pace, it would take 3.7 months to clear the current inventory, down from 4.0 months a year ago. A supply of six to seven months is seen as a healthy balance between supply and demand.