WASHINGTON (Reuters) - U.S. home resales fell from a more than 10-year high in April, weighed down by a chronic shortage of houses on the market that is keeping prices elevated and sidelining prospective buyers.

FILE PHOTO: An existing home for sale is seen in Silver Spring, Maryland February 21, 2014. REUTERS/Gary Cameron

Despite the stumble, the housing market remains on solid ground as the labor market nears full employment, which is expected to spur faster wage growth.

“The biggest problem with the housing market is a dearth of inventory, which is keeping sales down and prices up,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The National Association of Realtors said on Wednesday existing home sales declined 2.3 percent to a seasonally adjusted annual rate of 5.57 million units last month. Sales scaled a 5.70 million-unit pace in March, which was the highest level since February 2007.

Though the drop in sales was worse than economists’ expectations for a 1.1 percent decrease, April’s sales pace was the fourth highest over the past 12 months. Sales were up 1.6 percent from April 2016, also underscoring the housing market’s underlying strength.

There were 1.93 million houses on the market last month. While that was a 7.2 percent increase from March, supply was down 9.0 percent from a year ago. Housing inventory has dropped for 23 straight months on a year-on-year basis.

As a result, the median house price jumped 6.0 percent from a year ago to $244,800 in April, the highest level since June 2016 and marking the 62nd straight month of year-on-year price gains.

The sustained house price appreciation was also corroborated by a separate report from the Federal Housing Finance Agency showing house prices rose 6.0 percent in the first quarter from the first three months of 2016.

With recent data showing a drop in homebuilding and a plunge in new home sales in April, weak home resales suggest residential investment will probably make a small contribution to gross domestic product in the second quarter.

Housing added half a percentage point to the economy’s 0.7 percent annualized growth pace in the first quarter.

U.S. stocks were trading marginally higher. The PHLX housing index .HGX was little changed. Prices for U.S. Treasuries slipped while the dollar hovered above a 6-1/2-month low against a basket of currencies.

NEW NORMAL

Houses typically stayed on the market for 29 days last month, the shortest period since the NAR started tracking that measure in May 2011. That was down from 34 days in March and 39 days a year ago.

Demand for housing is being driven by a tight labor market, marked by a 4.4 percent unemployment rate, which is boosting employment opportunities for young Americans. The housing market also remains supported by historically low mortgage rates, with the 30-year fixed mortgage rate just above 4.0 percent.

But rising building material costs as well as shortages of lots and labor have left builders struggling to fill the inventory gap. Rising house prices have boosted equity for homeowners, but have not enticed many to sell their properties.

The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to eliminate the shortage. Housing starts are running at about a 1.2 million-unit rate and completions around a pace of 1 million units.

Last month, sales fell in the Northeast, West and South regions, but rose in the Midwest. At April’s sales pace, it would take 4.2 months to clear the stock of houses on the market, up from 3.8 months in March. A six-month supply is viewed as a healthy balance between supply and demand. First-time buyers accounted for 34 percent of transactions last month, still well below the 40 percent share that economists and realtors say is needed for a robust housing market, but up from 32 percent a year ago.

“Tight inventory, high demand and rising prices look to be with us for a while to come, and buyers should get used to this new normal,” said Svenja Gudell, chief economist at Zillow.