Home sales continue to fall

March was another tough month for home sales. Actually, it was the toughest month for home sales since 1989. In a report today from the National Association of Realtors, existing home sales fell 8.4% in March.

To find a monthly decline greater than last month's fall you would have to look all the way back to January 1989, a month that saw a monthly decline of 12.6%. On a seasonally adjusted annual rate, March sales showed an annual rate of 6.12 million units. This is the lowest annual rate since June 2003.

Along with falling numbers of home sales came lower median home prices. For the eighth straight month average home prices fell, this time by 0.3% to $217,000 across the nation. The current eight month streak of falling prices is the longest stretch on record. Not a pretty picture.

Two factors are being blamed on the March decline. The first factor was poor weather across most of the US during the month of February. Since poor weather kept home shoppers on the sidelines during February, the number of home sales that closed in March was lower. Another factor is the tightening of loan practices by finance companies. The recent troubles in the subprime mortgage business has put an end to the days of easy home financing. Standards are getting more strict and, as a result, the pool of candidates available to purchase homes is shrinking.

Definitely some more hard times ahead for the housing market. Any thoughts that we had seen the bottom of the recent pull-back are out the window now. Since the middle of 2006 the steep decline in the housing market is being blamed for reducing 1 percentage point from overall economic growth.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor'sObserver.