NEW YORK ( CNBC) -- Buyer traffic is strong, supply of homes for sale is low, and yet home prices continue to defy the usual formula, falling again in March. Prices usually rise as supply shrinks, but demand is still too low to make those historical "norms" compute, not to mention that the type of supply available is largely distressed. Foreclosures and short sales (when the home is sold for less than the value of the mortgage) accounted for 47.7% of sales, in a three month running average measured by Campbell/Inside Mortgage Finance. That's the 25th month in a row that distressed sales have topped 40% of the market. "With nearly half of the market being distressed, we're a long way from a return to a normal market," said Thomas Popik, research director at Campbell Surveys. "Agents responding to our survey say that homeowners with well-maintained properties in good locations are very reluctant to list at today's prices. That's why inventory is low--and also why forced REO and short sales are such a big proportion of the remaining market." Home prices for non-distressed properties fell 5.7% in March year-over-year, according to the survey. Prices for "damaged" REO (bank-owned properties) fell 5.7% and for move-in ready REO fell 2.5% during the same period. The real sticker shock is in short sales. Prices of those homes fell 14.3% from March of 2011.
By Diana Olick, CNBC Real Estate Reporter
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