U.S. existing home sales unexpectedly increased in February as lower mortgage rates and a moderation in house-price growth pulled buyers back into the market, but still-tight supply could constrain activity during the spring selling season.

Home sales rose 1.7% last month to a seasonally adjusted annual rate of 4.09 million units, the National Association of Realtors said on Tuesday. Data for the prior month was revised up to show sales falling to a rate of 4.02 million units from the previously reported 3.91 million-unit pace.

Economists polled by Reuters had forecast home resales decreasing to a rate of 3.89 million units. Last month’s sales likely reflected contracts that were signed in December and January, when mortgage rates began a sustained decline.

There was no indication that heavy snow and frigid temperatures that slammed large parts of the country in January had significantly disrupted activity, though sales dropped 6.0% in the Northeast. Sales rose in the West, the densely populated South and Midwest.

Overall existing home sales, however, fell 1.4% on a year-over-year basis. The median existing home price last month increased 0.3% from a year ago to $398,000.

“Housing affordability is improving, and consumers are responding,” Lawrence Yun, the NAR’s chief economist, said. “Inventory is growing, but sluggishly. If demand picks up notably in the coming months and outpaces supply growth, home prices will inevitably rise.”

The NAR said its Housing Affordability Index edged up to 117.6 in February from 117.1 in January. It was up from 103.1 a year ago. Affordability improved across all regions versus last year, with big gains in the West and South regions, it said.

Mortgage Rates Have Decreased

Mortgage rates have decreased considerably this year, in part after President Donald Trump ordered the Federal Housing Finance Agency to buy bonds issued by  mortgage finance giants Freddie Mac and Fannie Mae. The FHFA oversees these two companies.

Scope for further declines in mortgage rates is, however, likely limited amid the U.S.-Israeli war with Iran, which has boosted oil and gasoline prices, fanning inflation pressures and raising U.S. Treasury yields. Mortgage rates track the benchmark 10-year Treasury yield.

The popular 30-year fixed-mortgage rate averaged 6% last week, data from Freddie Mac showed. It had dropped to an average of 5.98% in the prior week, before the Middle East conflict flared up.

The inventory of existing homes increased 2.4% to 1.29 million units, still remaining well below pre-pandemic levels. Supply was up 4.9% from a year ago. At February’s sales pace, it would take 3.8 months to exhaust the current inventory of existing homes, up from 3.6 months a year ago.

The median days on the market for listed properties increased to 47 from 42 a year ago.

First-time buyers accounted for 34% of sales, up from 31% a year ago. Economists and realtors say a 40% share in this category is needed for a robust housing market. All-cash sales constituted 31% of transactions, down from 32% a year ago.

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

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(Reporting by Lucia Mutikani; Editing by Andrea Ricci)