Existing-Home Sales Fall...Again

So what do you want first—the good news or the bad news? I think we could all use a little good news ...

The good news: Sales of existing homes increased in the Northeast and West last month, according to a National Association of Realtors report released today (although sales declined in the Midwest and South).

Need some more? Well, some markets—that means you, Des Moines, Iowa, Durham, N.C., and Austin—showed "healthy price gains."

If only we could say the same for the market as a whole.

The bad news (and the report is mostly bad news): Existing-home sales fell 2 percent from February to March to remain at about 19 percent below year-ago levels.

At the same time, national median existing-home prices fell 7.7 percent from a year ago, while total housing inventory increased to a nearly 10-month supply.

That growing supply figure is particularly troubling. To work it off, sellers will most likely need to reduce prices even further.

Here's what Joseph Brusuelas, the chief U.S. economist at IDEAglobal, told his clients about the report (boldface is mine):

Purchasing activity has been diminished by the expectation of further price declines, tight credit markets and the snail like pace of banks who are very reluctant to implement higher conforming loan limits as authorized by the Federal government.... Taken together, the need of the banks to protect their own capital base and the real probability that the median price of homes will continue to fall for the remainder of the year does put the onus on those that have prematurely called an end to the sli de in the housing sector. When one adds in the growing inventory of homes on the market, that will only increase as foreclosures hit the market, we urge our clients to tread gingerly when approaching the purchase of housing sector assets.