January Existing Home Sales Drop 0.6 Percent

Sales of existing homes fell for a third straight month in February, pushing sales down to the lowest level since last July. There is concern that the fragile housing rebound could falter, making it harder for the overall economy to recover.

The National Association of Realtors said today that sales of previously occupied homes dropped 0.6 percent in February to a seasonally adjusted annual rate of 5.02 million. The weakness in sales depressed prices with the median home price dropping almost 2 percent from a year ago to $165,100.

But sales activity varied across the country. In the Midwest, sales jumped almost 9 percent, and were up more than 2 percent in the Northeast. In the South, sales fell about 1 percent, and were down almost 5 percent in the West.

Nationally, sales have been declining since November, despite the extension of tax credits for homebuyers. There is a $8,000 credit for first-time buyers and a $6,500 credit for current homeowners who have lived in their property for the past five years.

Buyers must sign sales contracts by the end of April and complete their purchases by the end of June to qualify for the tax credits. So far, there has been little indication that the tax credit extension is generating much activity. High unemployment and tough lending standards appear to be holding buyers back. That could derail housing as it tries to emerge from the worst downturn in decades and harm the overall economy.

"Without a firm foundation in housing, the economy will struggle to return to normal," said Lawrence Yun, chief economist for the Realtors.

He said it will be critical to see a rebound in sales in coming months to keep inventories from surging and adding further downward pressure on prices. For February, the inventory of unsold homes jumped by 312,000 to 3.59 million, an unusually large jump that pushed the supply of unsold homes to 8.6 months.

Yun called that increase "discomforting" and said if it climbs above 10 months supply it could put significant downward pressure on prices.

The National Association of Realtors.