WASHINGTON (Reuters] – U.S. house sales declined more than expected March 1, as prices for houses hit a record low despite improvements in supply. The decline could be further exacerbated by rising mortgage rates.

According to the National Association of Realtors, existing home sales fell 2.7% last month to an adjusted annual rate of 5.77million units. This data mainly reflects the closing of existing contracts that were signed between two and three months back when the 30-year fixed rate mortgage was lower than 4%.

Reuters polled economists and found that they expected sales to fall at a rate below 5.80million units. Now, sales are back at their pre-pandemic levels. The Midwest, South and Northeast saw sales declines. The South saw no change in sales.

The majority of U.S. home sales are through resales. In March, they were 4.5% lower year-over-year.

Average 30-year fixed-rate mortgage rates were 5.0% for the week that ended April 14th. This was the highest average since February 2011. It also increased from 4.72% the previous week. According to mortgage finance agency data, this is the highest ever recorded. Freddie Mac (OTC:).

As the U.S. central banks battle rising inflation, the Federal Reserve increased its policy interest rates by 25 basis point in March. According to economists, the Fed is expected to raise rates by 50 basis point next month and begin trimming its assets portfolio.

The most affected by interest rates is the housing market. Economists think that higher borrowing costs, despite the low supply of housing stock, will only moderately impact demand.

Single-family homebuilding fell and permits declined in March but both remain high. According to government data, Tuesday’s inventory of single-family homes under construction reached its highest level since November 2006.

However, many Americans find it increasingly difficult to own a home. In March, the median home price increased 15% over a previous year to reach a record $375,000. The upper end of the market saw the highest concentration of sales.

The number of previously-owned homes in the March market was 950,000, an increase of 11.8% over February and a decrease by 9.5% from last year.

The current inventory would be exhausted in 2.0 months at the March sales rate, which was 2.1 months less than a year ago. The healthy balance of supply and demand is considered to be a six-to seven-month supply.

The 30% increase in sales from February to March was due to first-time buyers, which is 29% more than last year and only 32% lower than a year earlier. In March, all-cash transactions accounted for 28%. This is the highest percentage since July 2014. This was an increase of 25% from February, and 23% in March 2020.