After a roller-coaster decade of boom-bust-boom, the United States housing market is going downhill just when many economists thought annual sales would be rising. Sales of second-hand properties last month fell 7.5 per cent from a year earlier to the slowest pace in 20 months, while purchases of new houses sank 14.5 per cent from February, according to reports. Mortgage applications to buy homes plunged 19 per cent from a year earlier, indicating slowing demand during what is typically the busiest season for deals. The housing market's underlying fragility is emerging as outside influences that fuelled a two-year rebound are receding. Mortgage interest rates are rising from record lows as the central bank withdraws its stimulus, and investors, who had helped drive national prices up more than 20 per cent as they went on a buying spree, are now retreating. "The very low rate environment and the high level of investment activities really masked how weak the housing market was," said Sam Khater, a deputy chief economist at CoreLogic. "Once it goes back to the normal owner-occupied purchase market, you really realise how weak the market is." While last year's spring buying season was characterised by bidding wars across the country as buyers rushed to take advantage of record-low mortgage rates amid low inventory, the market so far this year has been more affected by issues specific to local geographic areas. Sales are slipping in Phoenix and Las Vegas, where traditional buyers are not stepping in to fill the void left by investors. In San Francisco, Denver and Dallas, where job growth is robust, listings are scarce and overpriced for many house hunters. "We've had a boom and we've had a bust, and those were all national events," said Mark Palim, a vice-president for applied economics and housing research at Fannie Mae. "Now that national drivers are less significant to the market, you're seeing the re-emergence of local economic factors." Buyers, already handicapped by tight credit and weak wage growth, felt the hit to their buying power when mortgage rates rose last year. The average rate for a 30-year fixed mortgage was 4.33 per cent last week, according to Freddie Mac, up a percentage point from near record lows in May last year as the Federal Reserve scales back bond purchases. That raised the cost of a US$200,000 mortgage by 13 per cent, with monthly payments climbing to US$993 from US$881. Average mortgage down payments remain low compared with levels before the housing boom. Last year, borrowers put down 10 per cent on average, compared with 16 per cent in 2003, according to data from the National Association of Realtors. The average dipped to 8 per cent in 2009 and 2010, when tax incentives were put in place to encourage purchases by first-time buyers, who more often use federally insured loans with lower down payment requirements. The association's housing affordability index fell 16 per cent in the 12 months to February, the most recent month available. Prices had climbed so fast in the past two years that buyers had sticker shock, said Lawrence Yun, the association's chief economist. Yun said sales would decline 2 per cent this year after predicting, at the start of the year, for a small increase over last year. "Housing is a victim of its own success," he said. "It's just that the fast price growth is not healthy." Interest rates on 30-year mortgages are still about half the 8.36 per cent average since 1971, according to Freddie Mac's data. Rates on 30-year loans peaked at 18.6 per cent in 1981. Housing affordability is still 25 per cent above the average since 1986, based on the trade group's composite index, which measures housing costs, household income and interest rates. It was too early to say that the market's recovery was faltering, said Paul Diggle, a housing economist with London-based Capital Economics. Bad weather accounted for slower sales in parts of the northeast and midwest, Diggle said. "We have taken an optimistic view that as investor demand starts to drop off, we'll see improvement in organic demand," he said. "If we don't see anything by the middle of the year, we'll be changing our outlook." The recent slowdown in sales is making Moody's Analytics chief economist Mark Zandi "nervous" about his projection that job growth and wider credit availability will push second-hand home sales up 5 per cent and new-home sales up 40 per cent this year. "I hadn't expected this type of flatlining in the housing market for this long," Zandi said, "Investors have driven the market since the turn, back in early 2012, and investor demand is petering out." Investors who swooped in to take advantage of low prices - including companies buying homes to turn them into rentals - have retreated as costs rise and fewer distressed properties come to the market. The share of individual investor purchases fell last month to 17 per cent, the smallest for that month since 2008, according to the national realtors' association.