WASHINGTON, Feb 12 (Reuters) – Sales of existing U.S. homes fell to their lowest level in more than two years in January as falling inventories pushed up home prices.

Home sales fell 8.4 percent last month to a seasonally adjusted annual rate of 3.91 million units, the lowest level since December 2023, the National Association of Realtors said Thursday. Economists polled by Reuters had expected home resales to decline at a rate of 4.18 million units.

Last month’s sales likely reflected contracts that were signed in November and December and would not have been affected by the winter storms that hit much of the country in January. Home sales decreased by 4.4% year-on-year.

“The sales decline is disappointing,” said Lawrence Yun, NAR’s chief economist. “Affordability conditions are improving … due to wage gains outpacing house price growth and mortgage rates being lower than a year ago. However, supply has not kept pace and remains quite low.”

The NAR’s housing affordability index rose to 116.5 in January, the highest since March 2022, from 111.6 in December.

Mortgage rates have declined as the Federal Housing Finance Agency, which oversees mortgage finance giants Fannie Mae and Freddie Mac, began buying bonds issued by the two companies, though progress has stalled. Mortgage rates track the benchmark 10-year Treasury yield, which has risen amid high inflationary pressures and concerns about the federal government’s debt.

The inventory of existing homes fell 0.8% to 1.22 million units. The offer increased by 3.4% compared to a year ago. At January’s sales pace, it would take 3.7 months to exhaust the current inventory of existing homes, up from 3.5 months a year ago.

The median existing home price last month rose 0.9% from a year ago to $396,800, the highest for any January. The average days on the market for listed properties increased to 46 from 41 a year ago.

First-time buyers accounted for 31% of sales, up from 28% a year ago. Economists and real estate agents say a 40% share in this category is needed for a robust housing market. Cash sales made up 27% of transactions, down from 29% a year ago.

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

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)