WASHINGTON, (Reuters) – U.S. home sales dropped more than anticipated in February due to rising mortgage rates. Also, a persistent shortage of homes priced for first-time buyers pushed out potential buyers.

According to the National Association of Realtors, existing home sales fell 7.2% last month to an adjusted annual rate of 6.02 millions units. The decline in January sales was reversed, but the level of sales is still higher than pre-pandemic. Reuters polled economic experts and predicted that sales would decline to 6.10 millions units.

All four regions saw a decline in sales. U.S. home sales accounted for most of the decline. In February, they fell 2.4% year-over-year.

According to data from the mortgage finance agency, mortgage rates rose in February. The 30-year fixed rate was close to a record three-year high. Freddie Mac (OTC:). Last week it averaged 4.6% and climbed above 4.0%, the highest level since May 2019.

The Federal Reserve raised mortgage rates by 25 basis points on Wednesday. This is the Federal Reserve’s first increase in policy interest rates in over three years. They also laid out an aggressive plan for reducing borrowing costs until 2023.

Rising mortgage rates, rising home prices and a severe housing crisis will make it more difficult for people to afford homes. This is especially true for first-time homeowners. According to data from Commerce Department, the backlog for homes that are still being built reached a new record in February.

This week’s National Association of Home Builders Survey revealed that homebuilders were less confident than they had been in the past six months due to lumber shortages and high prices.

Bank of America Securities (NYSE:) Securities anticipates that strong house prices growth this year, and through 2023 due to tight supply will continue.

NAR reported that the median price of an existing home increased by 15% over a previous year to $357,000.300 in February. The upper end of the market saw the most sales.

NAR stated that the median monthly mortgage payment rose 28% from last year. That is an enormous burden on first-time home buyers, who made up only 29% in sales last month. A strong housing market requires a 40% participation of first-time buyers, according to realtors and economists. In February there were 870,000 homes that had been previously owned, which is 15.5% less than a year earlier.

It would take approximately 1.7 months for the inventory to be exhausted at February’s current sales rate, which is down from 2.0 months last year. The healthy balance of supply and demand is considered to be a six- to seven-month supply.