By Nicole Friedman 

The median sales price for previously owned homes climbed to a new record high in March as a shortage of homes limited transactions.

Existing-home sales dropped 3.7% in March from February to a seasonally adjusted annual rate of 6.01 million, the National Association of Realtors said Thursday, marking the second straight month of sales declines. March sales marked a 12.3% increase from a year earlier.

Economists surveyed by The Wall Street Journal expected a 1.8% monthly decline in sales of previously owned homes, which make up most of the housing market.

The housing market boomed in 2020, with home sales hitting the highest level in 14 years, due to low interest rates and new demand for housing spurred by the Covid-19 pandemic. But the pandemic also exacerbated a lack of inventory in the market. Buyers are competing fiercely for a limited number of homes, pushing prices sharply higher.

"The softening sales activity is not due to demand going away. Demand remains strong," said Lawrence Yun, NAR's chief economist. "It is the lack of inventory that is hindering the sales activity."

The median existing-home price rose 17.2% in March from a year earlier to $329,100, a record high, NAR said. The annual price appreciation was the strongest in data going back to 1999.

The typical home that sold in March spent 18 days on the market, the fastest pace on record and down from 20 days in February, NAR said.

Spring is usually the busiest time of year for home sales, as families try to move homes before the start of a new school year.

Some real-estate executives say inventory is likely to increase in the coming months, as sellers try to take advantage of spring activity. Increased vaccination rates could also make sellers feel more comfortable about the potential risk of letting strangers tour their homes.

There were 1.07 million homes for sale at the end of March, up 3.9% from February and down 28.2% from March 2020. At the current sales pace, there was a 2.1-month supply of homes on the market at the end of March.

Nationally, there were more real-estate agents in March than there were houses to sell, according to NAR.

Christine Reedy noticed the inventory shortage when she started browsing online listings in Bel Air, Md., in February.

"There wasn't a ton available, and whatever would come up, that stuff was gone within a day," she said. "It took maybe a week or two before I even saw a house that I wanted to go see."

She bought a three-bedroom townhouse in March for $270,000.

"Somewhere distantly in my mind I was like, 'Yeah, someday I want to own a home,' but it never seemed like a solid reality to me," said Ms. Reedy, who is 34 years old and works as a technical writer. "It feels really good."

Existing-home sales fell the most month-over-month in the West, down 8%, and in the South, down 2.9%.

Severe winter weather spread across much of the country in February, including widespread power outages in Texas.

Sales were especially strong at the high end of the market, with the number of homes selling that were priced over $1 million more than doubling in March compared with a year earlier, according to NAR.

Homes typically go under contract a month or two before the contract closes, so the March figures largely reflect purchase decisions made in February or January.

But shopping activity picked up in March, which could indicate increased home sales later this spring, according to real-estate technology provider ShowingTime. There were more than 10 home showings on average per active listing in 129 markets in March, up from 82 markets in February, ShowingTime said. Denver and Seattle had the most activity in March, with an average of 25 showings per listing in each city.

Demand for newly built homes has also climbed in the past year. But builders' ability to increase production is limited by shortages of land, labor and materials.

A measure of U.S. home-builder confidence rose in April, the National Association of Home Builders said last week. Housing starts, a measure of U.S. home-building, increased 19.4% in March from February, the Commerce Department said last week. Residential permits, which can be a bellwether for future home construction, rose 2.7%.

News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

April 22, 2021 10:54 ET (14:54 GMT)

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