US house prices fall to lowest in nine years

Sales of previously owned homes fell unexpectedly sharply in the United States in February and prices touched their lowest level in nearly nine years, implying a housing market recovery was still a long way off.

The National Association of Realtors said yesterday that house sales fell 9.6 per cent month on month to an annual rate of 4.88 million units, snapping three straight months of gains. The percentage fall was the largest since July.

Wall Street economists had expected February sales to fall 4.0 per cent to a 5.15 million-unit pace from the previously reported 5.36 million unit rate in January. The median home price dropped 5.2 per cent in February from a year earlier to $156,100 (£96,000), the lowest since April 2002.

"If the price declines persist, even with the job market recovery, that could hamper recovery in the housing market," the NAR chief economist, Lawrence Yun, said.

Compared with February last year, sales were down 2.8 per cent.

Oversupply of homes and a relentless wave of foreclosures are putting pressure on prices and holding back a recovery in the sector, whose collapse helped to tip the US economy into its worst recession since the 1930s. Foreclosures and short sales – typically below market value – accounted for 39 per cent of transactions in February. All-cash purchases made up a record 33 per cent of transactions in February.

Sales last month fell across the board, with multifamily dwellings declining 10.0 per cent and single-family home units down 9.6 per cent.

At February's sales pace, the supply of existing homes on the market rose to 8.6 months' worth from 7.5 in January. A supply of between six and seven months is generally considered ideal, with higher readings pointing to lower house prices.