Reuters

U.S. existing home sales dropped more than expected in January after three straight monthly increases as high mortgage rates and house prices stifled demand.

Home sales decreased 4.9% last month to a seasonally adjusted annual rate of 4.08 million units, the National Association of Realtors® said on Friday.

Sales likely reflected contracts signed in November and December. The average rate on the popular 30-year fixed mortgage increased from 6.72% at the end of October to 6.85% in the final week of December, data from mortgage finance agency Freddie Mac showed.

Home resales increased 2.0% year-on-year in January.

"Mortgage rates have refused to budge for several months despite multiple rounds of short-term interest rate cuts by the Federal Reserve," said Lawrence Yun, the NAR's chief economist.

"When combined with elevated home prices, housing affordability remains a major challenge."

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