A limited number of homes for sale and higher selling prices are making for one painstaking U.S. housing recovery.

Contract closings on previously owned properties unexpectedly dropped 3.3 percent to a 5.04 million annualized rate in April after a 5.21 million pace that was the strongest in almost two years, figures from the National Association of Realtors showed Thursday in Washington. Prices jumped the most since the start of 2014 as the inventory of houses on the market declined from the same time last year.

“Confidence in the housing market is still a little bit tentative,” said Tom Simons, a money market economist at Jefferies LLC in New York, whose projection for 5.1 million sales was among the closest in the Bloomberg survey. “We’ll start to see some more progress, but there are some roadblocks in the way for housing that won’t allow it to explode to the upside.”

The rebound in residential real estate has been stop-and-go as small wage gains and lingering concerns about taking on more debt offset the benefits of historically low mortgage rates. In order to strengthen, the economy needs more pronounced momentum from housing as manufacturing remains sluggish.

A series of factory reports Thursday indicated the industry remains tepid this month against a backdrop of weaker global growth and a strong dollar. The Markit Economics preliminary May manufacturing index dropped to the lowest level since January 2014. The Federal Reserve Bank of Kansas City’s gauge showed a third month of contraction and is the weakest since April 2009, a product of the slowdown in U.S. oil exploration.

Factory Headwinds

The effects of the labor dispute at West Coast ports earlier this year “should continue to wane, but the stronger dollar may prove to be a headwind to the sector for quite some time,” Wells Fargo Securities economists Tim Quinlan and Erik Nelson wrote in a note to clients.

The news Thursday wasn’t all bad. The average number of Americans filing for unemployment benefits over the past four weeks dropped to a 15-year low, while the Conference Board’s index of leading economic indicators climbed in April by the most in nine months.

Stocks rose, with the Standard Poor’s 500 Index rising to a record, amid better-than-forecast results from Salesforce.com and Best Buy Co. while gauges of the strength of the economy were mixed. The S P 500 climbed 0.2 percent to 2,130.82 at the close in New York.

Median Forecast

The median forecast in a Bloomberg survey for existing-home sales in April called for a rise to 5.23 million after a previously reported 5.19 million a month earlier.

Existing home sales, tabulated when a purchase contract closes, account for more than 90 percent of the residential market. New-home purchases, which make up about 8 percent and are tabulated when contracts are signed, are considered a timelier barometer. The Commerce Department will issue those data on May 26.

The median sales price of an existing home climbed 8.9 percent from a year earlier, the biggest 12-month gain since January 2014, to $219,400, the Realtors’ report showed.

While increasing property values hurt affordability for prospective buyers, they help bolster owners’ household wealth and build confidence among those whose homes are still worth less than their mortgages.

First-Time Buyers

First-time buyers accounted for 30 percent of all purchases for a second month. A year ago, the share was 29 percent.

They are slowly coming back into the market -- “very slowly,” Lawrence Yun, NAR’s chief economist, said at a news conference as the figures were released.

One reason prices are picking up is a lack of supply. The number of previously owned homes on the market fell 0.9 percent from a year earlier to 2.21 million.

Last month, it took about 39 days to sell a house once it came on the market, the least since the middle of 2013, Yun said. Also, about 40 percent of the listings sold at or above the asking price, indicating multiple bids are becoming common in some areas, he said.

“We don’t want prices to get too far ahead of income, but that is what’s happening because of lack of supply,” Yun said. Given the trend, the median price this year will probably top 2006 as the highest on record, he said.

Months’ Supply

At the current sales pace, it would take 5.3 months to sell those houses compared with 4.6 months at the end of the prior month. Less than a five months’ supply is considered a tight market, the Realtors group has said.

Sales of existing single-family homes decreased 3.7 percent to an annual rate of 4.43 million. Purchases of multifamily properties -- including condominiums and townhouses -- held at 610,000.

Purchases declined in three of four regions, led by a 6.8 percent drop in the South.

Even as the housing recovery makes progress, it still has a ways to go. A record 7.08 million previously-owned houses were sold in 2005. Three years later, existing-home sales plunged to a 13-year low of 4.11 million.

Home sales will continue to benefit from the improving job market. The unemployment rate fell in April to 5.4 percent, the lowest since May 2008, according to the Labor Department. Payrolls climbed by 223,000 in April after 85,000 in March.

Jobless Claims

The four-week average for jobless claims decreased by 5,500 to 266,250 in the period ended May 16, the Labor Department said Thursday. The figure matched a reading in mid-April 2000 that was the lowest since 1973.

The data correspond to the week the government surveys employers to calculate the monthly payroll data. The four-week average during last month’s payroll survey week was 285,000. On a weekly basis, applications for unemployment benefits rose by 10,000 to 274,000.

Wage gains, though, remain lackluster. Hourly pay was up 2.2 percent in April from a year earlier, holding within the narrow range tracked over the past four years, according to the Labor Department’s monthly jobs report.

Low borrowing costs are helping homebuyers. The average 30-year, fixed-rate mortgage was 3.84 percent in the week ended May 21, close to the level at the start of 2015 and below last year’s high of 4.53 percent in early January 2014, according to data from Freddie Mac in McLean, Virginia. It plunged to 3.31 percent in November 2012.