LOS ANGELES (AP) — Sales of previously occupied U.S. homes edged higher in May and the national median sale price posted its biggest annual drop in more than a decade, even as the supply of available properties sank to an all-time low.

Existing home sales rose 0.2% last month from April to a seasonally adjusted annual rate of 4.3 million, the National Association of Realtors said Thursday. That’s slightly above what economists were expecting, according to FactSet.

Sales sank 20.4% compared with May last year. That marks 10 consecutive months of annual sales declines of 20% or more. The annual drop was steepest in markets across the West and Northeast, where sales slumped more than 25%.

The national median home price fell 3.1% from May last year to $396,100, the NAR said. The year-over-year decline is the biggest since December 2011, when the housing market was still on the mend following the mid-2000s housing bust.

The latest housing market figures are more evidence that even with prices declining after heading higher for more than a decade many house hunters are being held back by a persistently low inventory of homes for sale.

“There's simply not enough inventory,” said Lawrence Yun, the NAR’s chief economist.

All told, there were 1.08 million homes on the market by the end of May, an increase of 3.8% from April, but down 6.1% from a year earlier, the NAR said. That’s the fewest homes for sale on records going back to 1999, Yun said.

The number of homes on the market at the end of May amounts to a 3-month supply at the current sales pace, an improvement over the 2.9-months in April and 2.6 months in May last year. Still, in a more balanced market between buyers and sellers, there is a 5- to 6-month supply.

The shortage of homes for sale has kept the market competitive, driving bidding wars in many places, especially for the most affordable homes. One-third of the homes that were purchased last month sold for more than their list price, Yun said.

Homes listed for sale in May typically sold within just 18 days, while 74% were on the market for less than a month, the NAR said.

The combination of high borrowing costs and intense competition for the most affordable homes on the market is keeping many first-time buyers on the sidelines. They accounted for 28% of home sales last month, down from 29% in April.

“First-time buyers (are) still struggling to get into the market,” Yun said.

While many homes are selling quickly after they hit the market, the dearth of properties for sale continues to be a drag on sales overall this year.

The U.S. housing market's sales slump started a little more than a year ago, when the average rate on a 30-year mortgage began to climb from ultra-low levels as the Federal Reserve began raising its short-term rate in its fight against inflation.

Global demand for U.S. Treasurys, which lenders use as a guide to pricing loans, investors’ expectations for future inflation and what the Fed does with interest rates influence rates on home loans.

The average rate on a 30-year home loan is still more than double what it was two years ago, when the ultra-low rates spurred a wave of home sales and refinancing. It fell this week to 6.67%, its third consecutive drop, according to mortgage buyer Freddie Mac. A year ago it averaged 5.81%.

Higher mortgage rates can add hundreds of dollars a month in costs for homebuyers on top of already high home prices. They also discourage homeowners who locked in those low rates two years ago from selling -- one reason the supply of homes for sale has been stubbornly low.

The trend will continue to be a major challenge for the housing market this year, said Danielle Hale, chief economist at Realtor.com. She forecasts that U.S. home sales will top out at around 4.2 million this year, which would be down around 16% from 2022 and the fewest since 2012. The forecast also calls for U.S. home prices to fall 0.6% for the year and for mortgage rates to drop to near 6% by the end of this year.

“With fewer homeowners poised to become sellers in 2023, buyers have a tough road ahead,” Hale said.