Home sales were down almost 8 percent in January

The number of U.S. homes for sale in January dropped by more than 14 percent from a year ago as the shortage of houses on the market continues to frustrate potential buyers.

Last month’s inventory decline was the largest in more than two years of steadily falling supply, according to an analysis of MLS data by Redfin. That trend has helped push the median home price up nearly 7.8 percent from January 2017, while tamping down sales by 7.9 percent.

The uncertain impact of tax reform on homeownership, which passed late last year, also contributed to the latest numbers, which show January sales were down 29.4 percent from December.

“Agents in high-tax states reported that some buyers were hesitant in November and December given the uncertainty around tax reform,” Redfin senior economist Taylor Marr said. “Potential move-up buyers are now reassessing whether it makes sense to list their homes in the face of higher mortgage rates and less favorable tax treatment for their next home.”

The media home price in January rose to $280,500, although homes were selling faster than a year ago. Homes were on the market an average of 53 days, with one in five selling above the lst price.

That suggests the 2018 market is shaping up to be even more competitive than last year, even as mortgage rates rise to their highest levels in four years.

“Many buyers are concerned about interest rates, but the biggest driver of this market is inventory, not rates,” said Joe Krupsaw, a Redfin agent in Washington, D.C. “I think when rates hit 4.5 percent we’ll see some buyers reassess their budgets and what they can afford, but they won’t stop looking for a home.”

A recent survey by Redfin found that just 6 percent of respondents said they put off buying a home if rates rose above 5 percent. On ein four said it would have no effect on thie r plans, while another 21 percent said it would increase their urgency to buy.