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Housing Still Hurting

Despite a sales uptick, home prices continue to fall.

Home prices continue to fall across the country, as evidenced by fresh home sales data Tuesday and additional land writedowns announced by homebuilder

Hovnanian Enterprises

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The National Association of Realtors said Tuesday that existing-home sales in the U.S. rose 3% to a rate of 6.46 million annualized units in January, above economists' expectation 6.24 million units. It was the largest increase in sales since January 2005.

The median price of homes sold in January fell 3.1% from a year earlier, the NAR said.

Meanwhile, Hovnanian said it expects to record $90 million of pretax charges related to the write-off of its August 2005 purchase of First Homebuilders, a Florida builder. The charges, tied to the company's operations in Fort Myers-Cape Coral, Fla., are due to a continued decline in sales pace and increasing cancellation rates during the quarter.

"Fort Myers is likely the most challenging housing market in the country," Bank of America analyst Daniel Oppenheim wrote in a research note Tuesday. "We do not expect a recovery near-term and think it was prudent to write-off a majority of its assets in the area."

After the reports, homebuilder stocks slid amid a broader selloff in the markets.

D.R. Horton

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recently was down $1.07, or 4%, to $25.76.

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fell $1.15, or 3.6%, to $30.51, and

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slipped $1.65, or 3.2%, to $50.37. Hovnanian was down 51 cents, or 1.6%, to $32.32.

Though existing-home sales saw a bump in January, some industry watchers say it's not necessarily a signal that the overall sales market is improving.

"I don't see this as a new strong upward trend in home sales, because I believe tightening lending standards will be a demand constraint," says Phillip Neuhart, an economic analyst with Wachovia.

One possible positive sign for homebuilders is that the inventory of homes on the market increased less than normal in January, according to the NAR data. Inventories were up 23.4% year over year to 3.06 million homes. The monthly increase totaled 4.8%, less than the typical 6.4% historical increase in January, Oppenheim noted.

"This is modestly positive, but the level of inventory remains just 8% off a record high and is likely to surpass the record level by the end of spring (inventories typically grow 16% Jan-April)," Oppenheim wrote. "We believe further price cuts will be needed to work through the excess inventory."

Also on Tuesday, the S&P/Case-Shiller Index, which tracks home prices across 20 major U.S. cities, showed that prices across the country fell 0.7% from November to December.

"Annual changes in home prices are either in decline, flat or yielding negative returns across all markets," Robert J. Shiller, a creator of the index and chief economist at MacroMarkets, said in a statement. "All metro areas are showing smaller annual returns than those reported for November."