Existing home sales fell 2 percent in March

updated 5:56 p.m. ET April 22, 2008

WASHINGTON - Sales of existing homes fell in March, the seventh drop in the past eight months, as the spring sales season got off to a rocky start.

The median price of a home was down compared with a year ago, and some economists predicted home prices could keep falling for many more months given all the troubles weighing on housing, from a severe credit crunch to a rising tide of foreclosures.

The National Association of Realtors reported Tuesday that sales of existing single-family homes and condominiums dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units.

The median price of a home sold last month was $200,700, a decline of 7.7 percent from a year ago and the seventh consecutive year-over-year price drop. It was also the second biggest decline following a record 8.4 percent drop in February. These records go back to 1999.

Patrick Newport, an economist with Global Insight, said he believed existing home sales would keep declining for another six months, with home prices falling well into 2009 given all the headwinds facing the housing market, including sinking consumer sentiment.

“All this adds up to another dismal house-selling season,” Newport said.

Video   How’s housing? April 22: CNBC’s Diana Olick and a panel of experts analyze the latest data on the housing market. CNBC

Many economists believe the country has already entered a recession, led by a two-year slump in housing and a related credit crunch that has led to billions of dollars in losses at major financial institutions. But President Bush disputed that view Tuesday.

“We’re not in a recession,” he told reporters during a joint news conference in New Orleans with the leaders of Canada and Mexico. “We’re in a slowdown. ... there’s no question we are in a slowdown.”

Democrats used the latest weak housing report to argue that Congress must pass legislation being considered this week in a House committee that would authorize the Federal Housing Administration to take on $300 billion in new loans for as many as 1 million distressed homeowners.

The legislation is aimed at helping homeowners whose mortgages are now larger than the value of their homes negotiate into lower, more affordable mortgages rather than face the prospect of defaulting on their current mortgage.

Realtors chief economist Lawrence Yun said a survey showed 18 percent of homes up for sale in March had negative equity, meaning the mortgage was larger than the value of the home. This percentage, which represented homes that were either in foreclosure or involved in a “short sale” in which the house was being sold for less than the value of the mortgage, was up from levels around 3 percent during the 2002-2006 housing boom.

Sen. Charles Schumer, D-N.Y., said the increase in homes with a negative equity underscored the need for Congress to act quickly “to prevent this crisis from getting any worse.”

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