U.S. Existing Home Sales Fell in March; Prices Lower

Sales of previously owned homes in the U.S. fell in March as loan restrictions and the prospect of further price declines kept buyers away.

Purchases dropped 2 percent, less than forecast, to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said today in Washington. The median sales price fell 7.7 percent from a year earlier.

Defaults on subprime mortgage loans have led banks to tighten borrowing rules, while home values are decreasing as foreclosures add to the glut of unsold properties. The housing slump, now in its third year, is one reason some Federal Reserve policy makers are concerned the U.S. is heading into a recession.

``There still is an imbalance in the existing housing market that needs to be corrected through lower inventories and higher sales,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York, which correctly forecast the sales level. ``The market will remain out of balance this year and most of next. As long as the housing market remains weak we think the economy will remain weak as well.''

Resales were forecast to fall 2.3 percent to a 4.92 million annual rate, according to the median projection of 72 economists in a Bloomberg News survey. Estimates ranged from 4.8 million to 5.08 million.

Treasuries were little changed after the report, with the benchmark 10-year note yielding 3.73 percent, up 1 basis point from yesterday. Stocks were lower.

Sales fell 19.3 percent in March compared with a year earlier. Resales averaged 5.67 million in 2007.

Homes for Sale

The number of homes for sale at the end of March increased by 40,000 to 4.06 million. At the current sales pace, that represented 9.9 months' worth, up from 9.6 months' worth at the end of the prior month.

The median price of an existing home dropped to $200,700 from $217,400 a year earlier. A report today from the government's Office of Federal Housing Enterprise Oversight showed February home prices were down 2.4 percent from a year earlier.

Existing-home sales account for about 85 percent of the U.S. housing market while new-home sales make up the rest. Monthly figures on resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier.

Many economists consider new-home purchases, which are recorded when a contract is signed, a more timely barometer of the market.

New-Home Sales

Figures from the Commerce Department later this week may show sales of new houses fell in March to an annual pace of 580,000, a 13-year low.

Resales of single-family homes fell 2.7 percent to an annual rate of 4.35 million. Sales of condos and co-ops increased 3.6 percent to a 580,000 rate.

Purchases rose 2.2 percent in the Northeast and the West. They fell 6.5 percent in the Midwest and 3.5 percent in the South.

Falling sales are prompting builders to slash construction and reduce prices. Work began on 947,000 homes at an annual rate in March, less than forecast and the fewest in 17 years, Commerce figures showed last week.

Decline in Homebuilding

Residential construction has subtracted from economic growth since the first three months of 2006, culminating in a 25 percent decline in homebuilding last year that was the biggest since 1980.

Fed Chairman Ben S. Bernanke said on April 2 that slumping home construction, employment and consumer spending may cause a recession. Other policy makers echo his concern.

``I'm expecting a contraction in economic activity in the first half of the year,'' Richmond Fed President Jeffrey Lacker said in a press briefing April 17. Financial turmoil continues to hurt economic activity, Lacker said, and ``the crucial variable is stability in the retail housing market.''

As interest rates on adjustable-rate mortgages reset higher, more Americans are defaulting on loans and walking away from their homes. Foreclosure filings surged 57 percent and bank repossessions more than doubled in March from a year earlier, Irvine, California-based RealtyTrac Inc., a seller of default data, said this month.

Leaving Cincinnati

Ryland Group Inc., a U.S. homebuilder that targets first- time buyers, will exit a market for the first time in a decade when it leaves the Cincinnati area next year. The company last week cited ``ongoing sluggish conditions'' in the local market. RealtyTrac data showed Ohio ranked third in foreclosure filings last month and had the seventh-highest foreclosure rate.

Unpaid debts are rising, hurting lenders. Bank of America Corp., the second-largest U.S. bank, yesterday said profit fell for a third straight quarter as it set aside $6.01 billion for bad loans.

``We remain concerned about the health of the consumer given the prolonged housing slump, subprime issues, employment levels and higher fuel and food prices,'' Chief Executive Officer Kenneth Lewis said in a statement.