WASHINGTON, April 13 (Reuters) - U.S. existing home sales fell to a nine-month low in March amid tight inventory and growing concerns over the labor market, and a recent increase in mortgage rates because of the war with Iran could limit activity this year.

Home sales dropped 3.6% last month to a seasonally adjusted annual rate of 3.980 million units, the lowest level since June 2025, the National Association of Realtors said on Monday. Economists polled by Reuters had forecast home resales easing to a rate of 4.06 million units. 

Existing home sales are counted at the closing of a contract. Last month's sales probably reflected contracts that were signed in January and February when mortgage rates were falling. Sales dropped in all four regions. Overall sales decreased 1.0% on a year-over-year basis in March. 

"Inventory remains a major constraint on the market," NAR Chief Economist Lawrence Yun said. "An additional 300,000 to 500,000 homes for sale would help bring the market closer to normal conditions and allow consumers to make purchase decisions without feeling rushed."

The labor market has been lackluster, with nonfarm payrolls declining in six of the last 15 months. The housing market also remains constrained by higher mortgage rates. 

The U.S.-Israeli war with Iran has boosted oil prices and sent U.S. Treasury yields rising amid worries about inflation. The government reported last week that monthly consumer prices https://www.reuters.com/world/middle-east/us-consumer-prices-surge-expected-march-2026-04-10/ increased by the most in nearly four years in March. 

Mortgage rates track Treasury yields. The popular 30-year fixed-mortgage rate averaged 6.37% last week, up from 5.98% on the eve of the war, data from Freddie Mac showed. 

It had dropped after President Donald Trump ordered Freddie Mac and Fannie Mae to expand purchases of mortgage-backed securities. Housing affordability has become a potent political issue ahead of the November midterm elections, with the quintessential American dream of homeownership increasingly out of reach for many.

MEDIAN HOUSE PRICE INCREASES

The NAR lowered its home sales growth estimate for 2026 to 4% from 14%. Its housing affordability index fell to 113.7 in March from 117.5 in February. It was, however, up from 104.2 a year ago.

"Mortgage rates have been rising, and that has led us to trim our home sales outlook for the year," said Yun. "Even with a more modest pace of sales growth, home prices continue to steadily increase due to minimal inventory growth.

   The median existing home price last month increased 1.4% from a year ago to $408,800, the highest for any March. The inventory of existing homes increased 3.0% to 1.36 million units, still remaining well below pre-pandemic levels. Supply was up 2.3% from a year ago. At March's sales pace, it would take 4.1 months to exhaust the current inventory of existing homes, up from 4.0 months a year ago.

The median days on the market for listed properties increased to 41 from 36 a year ago.

First-time buyers accounted for 32% of sales, unchanged from a year ago. Economists and realtors say a 40% share in this category is needed for a robust housing market. All-cash sales constituted 27% of transactions, up from 26% a year ago.

Distressed sales, including foreclosures, made up 2% of transactions, down from 3% from a year ago.