Sales of existing homes plunged in March by the largest amount in nearly two decades, reflecting bad weather and increasing problems in the subprime mortgage market, a real estate trade group reported.
The National Association of Realtors reported that sales of existing homes fell by 8.4% in March, compared with February. It was the biggest one-month decline since a 12.6% drop in January 1989, another period of recession conditions in housing. The drop left sales in March at a seasonally adjusted annual rate of 6.12 million units, the slowest pace since June 2003.
The steep sales decline was accompanied by an eighth straight fall in median home prices, the longest such period of falling prices on record. The median price fell to $217,000, a drop of 0.3% from the price a year ago.
The fall in sales in March was bigger than had been expected and it dashed hopes that housing was beginning to mount a recovery after last year's big slump. That slowdown occurred after five years in which sales of both existing and new homes had set records.
David Lereah, chief economist at the Realtors, attributed the big drop in part to bad weather in February, which discouraged shoppers and meant that sales that closed in March would be lower. Existing home sales are counted when the sales are closed.
Lereah said that the troubles in mortgage lending were also playing a significant part in depressing sales. Lenders have tightened standards with the rising delinquencies in mortgages especially in the subprime market, where borrowers with weak credit histories obtained their loans.
There was weakness in every part of the country in March. Sales fell by 10.9% in the Midwest. They were down 9.1% in the West, 8.2% in the Northeast and 6.2% in the South.
Consumer Confidence Tumbles
Consumer confidence crumbled in April as rising gasoline prices undermined how Americans feel about the prospects for economic growth, a widely watched gauge of the economy showed on Tuesday.
The New York-based Conference Board said its Consumer Confidence Index dropped to 104.0, in April, down from a revised 108.2 in March. Analysts had expected a reading of 105. The April reading was the lowest since August, when the index was at 100.2.
The Present Situation Index, which measures how shoppers feel now about economic conditions, decreased to 131.3 from 138.5 in March. The Expectations Index, which measures consumers' outlook for the next six months, declined to 85.8 from 87.9.
'Unlike the decline in March, which was solely the result of apprehension about the short-term outlook, this month's decline was a combination of weakening expectations and a less favorable assessment of present-day conditions,' said Lynn Franco, director of The Conference Board Consumer Research Center, in a statement. 'Rising prices at the gas pump continue to play a key role in dampening consumers' short-term expectations.'
Franco noted that the decline in the Present Situation Index -- the first decline in six months -- needs to be watched closely in the months ahead.