Home sales plummet 9.6 percent in February, median price lowest in 9 years

The housing market continues to get worse. It isn't too surprising that the gap between new and old home prices is getting bigger. Prices for new homes have to be above a certain level or they won't get built.

Fewer Americans bought previously occupied homes in February and those who did purchased them at steep discounts. The weak sales and rise in foreclosures pushed home prices down to their lowest level in nearly nine years.

The National Association of Realtors said Monday that sales of previously occupied homes fell last month to a seasonally adjusted annual rate of 4.88 million. That's down 9.6% from 5.4 million in January. The pace is far below the 6 million homes a year that economists say represents a healthy market.

Nearly 40% of the sales last month were either foreclosures or short sales, when the seller accepts less than they owe on the mortgage.

One-third of all sales were purchased in cash — twice the rate from a year ago. In troubled housing markets such as Las Vegas and Miami, cash deals represent about half of sales.

The median sales price fell 5.2% to $156,100, the lowest level since April 2002. . . .

New-home prices are now 45% higher than prices for previously occupied homes. A more normal difference is about 15%, an indication that old homes on the market are being sold at comparatively cheap, and affordable, levels. . . .

The Financial Times reports:

Despite lower prices, “traditional” homebuyers were being discouraged from entering the market by tight credit conditions, said Lawrence Yun, NAR’s chief economist. “We’d be seeing greater numbers of traditional homebuyers if mortgage credit conditions return to normal.” . . .