WASHINGTON, (Reuters) – Sales of single-family American homes fell in March due to rising mortgage rates and lower prices. However, the housing market is still supported by a severe shortage of properties that were previously owned.

According to the Commerce Department, new home sales fell 8.6% last month to an adjusted seasonally adjusted annual rate at 763,000 units. The February sales pace has been revised to 835k units, up from the 772,000 units previously reported.

In all regions, sales fell. The number of new homes is a key indicator of the housing market. They are counted at the time a contract has been signed. It can also give an indication of how higher mortgage rates will affect housing demand.

Reuters polled economists to forecast that new home sales would drop to 765,000 units. This is despite the fact that they account for a tiny portion of U.S. home sale. On a year-on, March sales fell 12.6%. Sales peaked in January 2021 at the rate of 993,000 units, the highest point since 2006.

Average 30-year fixed-rate mortgage rates were 5.11% for the week that ended April 21, which is higher than April 2010’s 5.00% and the lowest since March 2010, according to data from Mortgage Finance Agency. Freddie Mac (OTC:).

Last month’s Federal Reserve rate increase was 25 basis points. It is the most significant rate rise in over three years as the central bank fights inflation. Economists predict that the Fed will raise its rates by 50 percent next week. It also plans to reduce its asset holdings.

However, with a record low number of properties previously owned, economists expect that rising borrowing costs will only moderately impact the new housing market. According to data last week, sales of previously-owned homes dropped to its lowest level for nearly two decades in March.

From a year earlier, March’s median house price rose by 21.4% to $436,000. Nearly all houses that were sold in March exceeded the $200,000 mark. Expect strong house price growth through the year, and well into 2023.

From 392,000 homes in February, there was 407,000 more new listings. 65.5% were houses in construction; homes that are still to be constructed accounted for approximately 25.8%.

Backlogs are at an all time high for homes that were approved but not yet started. This is because builders have to deal with lacks in inputs, such as lumber, cabinets, garage doors, countertops, and appliances.

It would take 6.4 months for the inventory of homes to be sold at March’s pace, an increase from February’s 5.6 months.