Home Resales Fall Despite Continued Price Declines

By JEFF BATER and MAYA JACKSON RANDALL WASHINGTON -- Existing-home sales dropped in March, and the median price was down 12% from a year earlier. Home resales fell by 3.0% to a 4.57 million annual rate from 4.71 million in February, the National Association of Realtors said Thursday. The NAR originally reported February sales rose 5.1% to 4.72 million. WSJ eonomics reporter Kelly Evans and Phil Izzo discuss the latest jobless claims and a report showing existing-home sales slowed despite declining prices. About 50% of the 4.57 million in March sales were foreclosures and short sales. The large number of these distressed property sales has driven prices lower, year over year. The median price for an existing home last month was $175,200, down 12.4% from $200,100 in March 2008. Lower prices, combined with historically low borrowing costs, have increased affordability. The average 30-year mortgage rate was 5.00% in March, down from 5.13% in February, Freddie Mac data show. Realtors also hope demand is stirred by the $8,000 tax credit for first-time home buyers included in the Obama administration's economic stimulus package. A steady decline in price is troubling because it can give pause to would-be buyers, hesitant in hope for a better deal. On a bright note, the median price, on a monthly basis, has climbed two months in a row. It was $168,200 in February, an upward revision from an originally reported $165,400. Tighter mortgage lending standards have made it harder to fund a purchase. And the uncertain economic outlook is also hurting the existing-home market. The unemployment rate rose to 8.5% in March from 8.1%. Falling demand has kept inventories of unsold homes high. Inventories of previously owned homes fell 1.6% at the end of March to 3.74 million available for sale. That represented a 9.8-month supply at the current sales pace, compared to 9.7 in February. Bloated inventories, in turn, are depressing prices. The March resales level of 4.57 million reported Thursday by NAR was below Wall Street expectations of a 4.69 million sales rate for previously owned homes. NAR economist Lawrence Yun said first-time buyers are driving the market. "The share of lower priced home sales has trended up, indicating a return of many first-time buyers," he said. Previously owned home sales, year over year, were down 7.1% from the pace in March 2008, Thursday's report said. Regionally, sales in March compared to February fell 8.0% in the Northeast, 1.7% in the South, and 4.2% in the West. Sales were unchanged in the Midwest. Jobless Claims Rise New U.S. claims for state unemployment benefits rose last week, while the total number of people drawing unemployment benefits surged to the highest level on record. The expected rise comes after the Labor Department reported an unexpected plunge last week that had offered a ray of hope that the job market could be finding its footing. Initial claims for state jobless benefits grew 27,000 to 640,000 in the week ended April 18, the Labor Department said in a weekly report Thursday. Wall Street economists had expected a 30,000 rise, according to a Dow Jones Newswires survey. The prior week's level was revised to 613,000, which is 2,000 higher than the 610,000 level initially reported. A Labor Department analyst said Thursday's report was no surprise. "It's actually pretty uneventful," he said. "Most of the states are doing what we expected." The four-week average -- which aims to smooth volatility -- fell 4,250 to 646,750. Economists are closely eyeing the weekly claims report amid signs that some sectors of the economy like housing and consumer spending may be stabilizing, albeit at very weak levels. Recently, Federal Reserve Chairman Ben Bernanke and Obama administration officials have expressed some cautious optimism that the sharp decline in economic activity may be slowing. However, if the U.S. keeps losing jobs at its recent pace, it could prevent a consumer-led recovery from taking hold. At the same time, a clear decline in the number of American's filing for unemployment benefits could signal a turn for the better in the broad economy. According to Thursday's Labor Department report, the tally of continuing jobless claims -- those drawn by workers collecting benefits for more than one week in the week ended April 11 -- surged another 93,000 to 6,137,000, the highest level on record. The unemployment rate for workers with unemployment insurance rose 0.1 percentage point to 4.6%, its highest level since January 1, 1983. Not adjusted to reflect seasonal fluctuations, Florida reported the largest increase in new claims during the April 18 week, 9,303, due to layoffs in the construction, trade, service and manufacturing industries. Michigan reported the biggest decrease, 12,566, due to fewer layoffs in the automobile industry. Write to Jeff Bater at jeff.bater@dowjones.com and Maya Jackson Randall at Maya.Jackson-Randall@dowjones.com