A rebound in residential real estate remains elusive. After two months of stronger sales and some tentative suggestions that the housing market was stabilising, sales last month of previously owned homes took their biggest tumble in nearly two decades.

The National Association of Realtors said on Tuesday that sales of existing homes, which account for the vast majority of all home sales, fell 8.4 per cent in March. That was the steepest monthly decline since January 1989. The combination of winter weather and newly tightened lending standards for people with weak credit probably sped the drop, economists said.

The fresh data on home sales came as two other economic reports showed further deterioration in home prices in major metropolitan areas and a growing sense of consumer unease.

At first, the news deflated stock prices on Wall Street. Investors quickly shook off their worries and pushed the Dow Jones industrial average high enough to come within 11 points of 13,000 - a high point it has never crossed. But at the close of the trading day, stocks finished mixed, with the Dow closing up 34.54 points at 12,953.94.

The realtor association’s report reflected a housing market that became increasingly unfriendly to those looking to sell their homes last month. While the number of unsold existing homes for sale fell 1.6 per cent in March, to 3.75 million, it took longer to sell a home. There was a 7.3-month supply of unsold properties, up from a 6.8-month supply in February.

The backlog grew even as prices dropped. The median price of a single-family home decreased 0.9 per cent last month, to US$215,300, compared with a year earlier. Total sales compared with a year earlier were off 11.3 per cent.

‘Because demand is weak, and because inventories remain high, there’s little ability for prices to rise,’ said Celia Chen, director of housing economics at Moody’s economy.com. Ms Chen speculated that the overall inventory number may have declined last month because sellers were pulling their homes off the market in frustration.

‘The overall trend in housing is still weak,’ she said. The sharp fall in existing home sales last month was a sign that the increases earlier this year were not in line with the market’s underlying path.

Lawrence Yun, senior economist with the realtor association, said: ‘The January, February figures were certainly higher than many analysts had anticipated, and that was due to the sort of artificial elevation from the warm weather. Now it’s payback time in March.

‘He said that as the weather becomes warmer and seasonal distortions become less of a factor, it will be easier to determine where the market is headed. ‘That’s when we have the weather influences out of the way, and we’ll see the market stabilise, recover or continue to slump.’

One bright spot in the housing data was sales of condominiums. In contrast to overall home prices and sales - which both declined - sales of condos and co-op apartments were unchanged last month as prices rose 3.2 per cent, to US$228,200, from a year earlier.

Meanwhile, Standard and Poor’s, which surveyed home prices in 20 major metropolitan areas, found that prices fell in 17 of those cities in February. And the Conference Board said on Tuesday that its measure of consumer confidence for April fell for the second straight month.

Source: The Business Times, 26 April 2007