By Lindsay Dunsmuir
WASHINGTON (Reuters) - U.S. home sales increased more than expected in October and house prices rose at the fastest pace in more than two years amid lower mortgage rates and a shortage of properties for sale.
The National Association of Realtors said on Thursday that existing home sales rose 1.9% to a seasonally adjusted annual rate of 5.46 million units last month. September's sales pace was downwardly revised to 5.36 million units.
Economists polled by Reuters had forecast existing home sales rising 1.4% to 5.47 million units.
The U.S. Federal Reserve has cut interest rates three times this year, which has bolstered the housing market by lowering mortgage rates.
Last week, Fed Chair Jerome Powell reiterated that he and his colleagues see a "sustained expansion" ahead as likely for the country's economy, with the full impact of recent interest rate cuts still to be felt and low unemployment boosting household spending.
The central bank's reduction in borrowing costs has caused the 30-year fixed mortgage rate to drop more than 130 basis points since last November's peak to an average of 3.66%, according to data from mortgage finance agency Freddie Mac.
Other factors continue to weigh on housing though, including a chronic lack of properties for sale, which has inflated prices and kept many buyers on the sidelines.
There were 1.77 million homes in the market last month, a decline of 4.3% compared to a year ago.
In a more positive sign, data on Tuesday showed U.S. homebuilding rebounded in October and permits for future home construction jumped to a more than 12-year high.
The median existing house price climbed 6.2% from a year ago to 270,900 in October, the strongest price appreciation since June 2017. It was the 92nd consecutive month of year-on-year price gains.
"The lack of inventory is pushing up prices way too fast," said NAR Chief Economist Lawrence Yun.
Existing home sales rose 4.6% from one year ago, the NAR said, the fourth consecutive month of year-on-year gains. Sales were mixed across the nation's four regions last month. They increased 4.4% in the South and 1.6% in the Midwest but retreated 1.4% in the Northeast. They fell 0.9% in the West.
At October's sales pace, it would take 3.9 months to clear the current inventory, down from 4.3 months a year ago. A supply of six to seven months is seen as a healthy balance between supply and demand.