US home resales rebounded modestly in February against the backdrop of a persistent shortage of properties on the market, a trend that could undermine the spring selling season. Sluggish home sales are another sign that economic activity slowed sharply in the first quarter, which could further diminish expectations that the Federal Reserve will increase interest rates in June.
"Part of the problem is that buyers don't have a lot of choice. The Fed singled out housing as a sector that remains slow, and it still is, but that doesn't mean the Fed shouldn't hike rates," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
The National Association of Realtors said on Monday that existing home sales rose 1.2 percent to an annual rate of 4.88 million units, failing to reverse January's 4.9 percent plunge.
Tight inventories are hurting sales by boosting home prices and limiting the selection of houses available to potential buyers. According to the Realtors group, buyers typically look at between 10 to 15 houses before making a purchase.
Economists had forecast home resales rising to a 4.90 million-unit pace last month.
February's sluggish sales suggested that broker commissions and residential investment weakened in the first quarter.
Economic growth estimates for the January-March period range from a 1.2 percent to 2 percent annual rate.
The economy grew at a 2.2 percent pace in the fourth quarter.
A tight housing supply means builders will need to ramp up construction. The US housing sector index on Monday was up marginally, with shares in the largest homebuilder, DR Horton, gaining 0.1 percent. Shares of Lennar Corp were up 0.3 percent, while Pulte Group advanced 0.1 percent.
The median price for a previously owned home was 7.5 percent higher from a year ago. That was the largest percentage gain since February 2014 and suggested that the pace of home price increases, which had been slowing after double-digit growth for much of 2013, appears to be reaccelerating.
That is helping to sideline first-time buyers despite a firming labour market and government steps to ease credit conditions.
First-time buyers accounted for 29 percent of transactions last month, well below the 40 percent to 45 percent share that economists and realtors say is required for a strong housing recovery.
In February, the inventory of unsold homes on the market rose 1.6 percent to 1.89 million units. Supply was, however, down 0.5 percent from a year ago.
Inventory growth should be averaging roughly 5.6 percent at this time of the year, when the market gets ready for the spring selling season, which runs from April through August and is traditionally the busiest time of the year for housing, according to the Realtors association.
At February's sales pace, it would take 4.6 months to clear houses from the market, unchanged for a second straight month. A supply of six months is viewed as a healthy balance between supply and demand.
Apart from tight supply, sales last month were also constrained by harsh winter weather. Sales in the Northeast, which was slammed by storms for much of the winter, tumbled 6.5 percent last month. Sales in the Midwest were unchanged. Sales rose in the South and West.