The Wall Street Journal

22 March  2011

Sales of previously occupied homes in the U.S. sank by 9.6% in February and prices fell to the lowest level in nearly nine years, indications that the market remains depressed.

Existing-home sales decreased from a month earlier to a seasonally adjusted annual rate of 4.88 million, the lowest level since November, the National Association of Realtors said Monday.

The results were worse than forecast. Economists surveyed by Dow Jones Newswires had expected home sales to decline by 3.9% to an annual rate of 5.15 million.

The results called into question whether the U.S. housing market is recovering or falling further.

“We have an uneven, choppy recovery,” said Lawrence Yun, NAR’s chief economist. “Hopefully it is a recovery that is taking place.”

Though the rest of the U.S. economy has been gathering steam, the housing market’s troubles are persisting. Last year was the worst year for sales of previously occupied homes since 1997, with about 4.9 million homes sold, according to the Realtors group.

The median sales price for an existing home fell to $156,100, the lowest level since April 2002. That’s down 5.2% from the year-ago median price of $164,600 and down from the median of $157,900 in January.

The inventory of previously owned homes listed for sale rose 3.5% at the end of February to 3.49 million available for sale. That represented a 8.6-month supply at the current sales pace, compared with a revised 7.5-month supply in January. Inventories are likely to rise in the coming months as more homeowners list their homes during the spring selling season.

Those homeowners are competing with a large inventory of foreclosures and other distressed properties.

Distressed properties including foreclosures and short sales — ones in which the lender agrees to sell a property for less than the total mortgage amount — accounted for about 39% of sales in February, the highest level in nearly two years.

About 3.6 million homes are likely to be lost to a foreclosure or distressed sale by 2013, on top of 6.7 million since 2006, according to Moody’s Analytics. That large “shadow inventory” of unlisted bank-owned homes and potential foreclosures mean that inventories are likely to remain high and prices could take even longer to stabilize.

Partly as a result, home prices fell to new lows in 11 major U.S. cities in December, according to the Standard & Poor’s/Case Shiller home price index released last month. That index, a widely tracked measurement of home prices, has declined for five consecutive months, almost erasing gains since the recession ended in June 2009.

The Realtors group also said Monday that January’s sales rate was revised upward to 5.40 million from an initial estimate of 5.36 million. Compared with the same month a year ago, home resales were down 2.8% in February.

The Realtors report said home sales fell last month compared with a month earlier in all four regions. Sales fell 12.2% in the Midwest and 10.2% in the South. Sales fell 8.0% in the West and 7.2% Northeast. With demand weak, builders have kept construction low. Home construction in the U.S. took the steepest monthly plunge in nearly 27 years in February and new building permits set a record low, the Commerce Department said last week.