Sales of previously owned U.S. homes fell in March by more than forecast, underscoring a housing market that’s still on shaky footing despite some signs of stabilizing.

Contract closings decreased 2.4% last month to an annualized pace of 4.44 million after an outsize jump in February, according to data released Thursday by the National Association of Realtors. The median estimate in a Bloomberg survey of economists called for 4.5 million.

“Home sales are trying to recover and are highly sensitive to changes in mortgage rates,” Lawrence Yun, NAR’s chief economist, said in a statement. “At the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand.”

Some 28% of homes sold during the month went above list price, Yun added. About 5% were classified as vacation-home sales, down from 7% a year ago.

Even though mortgage rates have come off their peak, many homeowners locked in much lower rates in recent years and are reluctant to move. Also, the Federal Reserve will likely raise borrowing costs again and credit conditions have tightened notably since several banks collapsed last month.

However, Yun suggested that, barring any large jump in mortgage rates, existing-home sales may have already bottomed. Before February, sales had dropped for a record 12 months in a row.

Tight Inventory
The number of homes for sale edged up to 980,000 last month, but still indicative of a lack of inventory. That’s leading to multiple offers on especially entry-level homes, Yun said. 

It would take 2.6 months to sell all the properties on the market. Realtors see anything below five months of supply as indicative of a tight market.

Separate data this week showed single-family homebuilding climbed to a three-month high in March. Homebuilder sentiment has been on the rise for the past four months as buyers flock to new construction.

The median selling price of a previously owned home fell 0.9% from a year earlier to $375,700 in March—the largest decline since January 2012, according to Yun. Homes priced between $250,000 and $500,000 made up nearly half of the month’s transactions, while those above $750,000 comprised a much smaller share.

About two thirds of homes sold were on the market for less than a month. Properties remained on the market for 29 days on average in March, down from 34 days in the prior month.

Sales of single-family homes dropped 2.7% to an annualized 3.99 million. Existing condominium and co-op sales were unchanged.

Digging Deeper
Among other developments:

  • Sales dropped in all regions but the Northeast, which was unchanged from February.
  • First-time buyers made up 28% of purchases in March, still historically low. Yun said a “normal” share is closer to 40%.
  • Cash sales represented 27% of total sales, slightly lower than the prior month. Investors, who often purchase with cash and are therefore less sensitive to mortgage rates, made up 17% of the market.

Existing-home sales typically account for the vast majority of U.S. housing and are calculated when a contract closes. Data on new-home sales, which make up the remainder, are based on contract signings, will be released next week.

—With assistance from Jordan Yadoo.

This article was provided by Bloomberg News.