Sales of Existing Homes Dive

The supply of inventory rises to the highest level since November.
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Existing-home sales fell 8.4% from February to March, and the months' supply of inventory rose to the highest level since November, signaling that the housing market remains worse than most economists have projected.

Sales totaled an annualized rate of 6.12 million last month, the National Association of Realtors said Tuesday. Most of the weakness came in the single-family market, while condo sales were flat. Economists had expected a sales pace of 6.5 million, according to

Reuters

.

The 8.4% sales drop month over month was the biggest decline since 1989. Sales fell 11.3% from a year earlier. Existing-home sales are seen as a lagging indicator, since the data are based on home closings, which typically occur one to two months after purchase contracts are signed.

The NAR report mirrors the government's weak new-home sales data from the past two months.

"We expected a below-consensus number, but this is worse than we expected," says Phillip Neuhart, an economic analyst with Wachovia. His firm believes existing-home sales will fall to 5.98 million this year, compared with 6.48 million in 2006.

The median price of a home fell 0.3% in March from a year ago to $217,000. Condo prices rose 3.2%, while single-family home prices slipped 0.9%.

Inventory climbed to 7.3 months of supply from 6.8 months in February. The rise is bad news for homebuilders, which are dropping prices to move houses. Builders' stocks fell on the news.

Centex

(CTX)

lost 3% to $44.45, and

Ryland

(RYL)

gave back 2.5% to $44.61.

David Lereah, NAR's chief economist, said in a statement that he anticipated the drop.

"For the last couple months we've been expecting a weather 'hit' on home sales finalized in March, but looking at overall activity in the first quarter we see that existing-home sales averaged 6.41 million -- a figure that is moderately higher than the sales pace during the second half of 2006," he said.

"We also may be seeing some losses as a result of the subprime fallout," he continued. "However, this is masking improved fundamentals in the housing market, with lower mortgage interest rates and motivated sellers."