NAR: US pending home sales drop to new low in March

By J.W. ELPHINSTONE AP Business Writer

NEW YORK (AP) - An industry group said Wednesday that pending U.S. home sales dropped to a new low in March, signaling the housing slump has yet to bottom out even as the spring sell season gets under way.

The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell to 83.0 from a downwardly revised February reading of 83.8, the index's previous low. The index stood at 103.9 in March 2007.

Wall Street economists polled by Thomson/IFR had predicted the index would slip to a reading of 83.8.

A reading of 100 is equal to the average level of sales activity in 2001, when the index started.

Falling home prices and a tight credit environment have pummeled the housing market and sent potential buyers to the sidelines to wait out the slump. So far, there's been no evidence that the traditionally strong spring selling season is jump-starting any sales activity.

"The fact that the pending home sales index fell again in March reaffirms fears that the housing market correction still has room to run," a report from Moody's Economy.com said.

On Tuesday, Fannie Mae, the country's largest buyer of home loans, reported a $2.2 billion first quarter loss, and its CEO said home prices in the period fell "faster than anyone anticipated." The company forecast a nationwide drop in home prices in 2008 of 7 percent to 9 percent.

Moody's Economy.com also expects the weak numbers in March to lead to further softness in April and May since there's usually a one- to two-month lag between when a buyer signs a home sales contract and the closing of the deal.

The NAR takes on a more optimistic outlook and forecasts existing home sales activity and the economy to pick up in the second half of the year as larger home loans backed by the Federal Housing Administration become more widely available. The FHA recently raised the mortgage limits for loans it guarantees.

"Things are beginning to improve, but the availability of affordable mortgages is uneven around the country and sometimes within metropolitan areas," said NAR chief economist Lawrence Yun.

NAR expects existing-home sales to edge up to an annual pace of 5.82 million in the fourth quarter from 4.95 million in the first quarter. For the year, the group estimates sales will total 5.39 million and then increase 6.1 percent in 2009 to 5.72 million.

It also expects median price to decline 2.4 percent in 2008 to $213,700 before gaining 4.1 percent to $222,6000 next year.