Home prices in March fall 12% from '08 despite monthly uptick

— -- Home prices continued to slide last month as foreclosed and other distressed properties drew first-time buyers and bargain hunters into the market.

Although prices rose from February to March, the national median existing-home price for all housing types was $175,200, down 12.4% from March 2008, the National Association of Realtors (NAR) reported Thursday.

Sales of distressed homes made up about half of all sales, and about two-thirds of those were foreclosures. Distressed homes also include short sales, in which properties are sold for less than the balance owed on the mortgage.

March sales fell 3% from February to a seasonally adjusted annual rate of 4.57 million properties. The February rate was revised downward to 4.71 million. Last month's sales were 7% lower than in March 2008.

Sales are largely being driven by first-time home buyers, who now make up more than half of transactions. Meanwhile, sales of higher-priced homes have almost entirely stalled, in part because of the higher interest rates that accompany so-called jumbo mortgage loans.

Lawrence Yun, NAR's chief economist, says that the more modest ups and downs seen in home sales in recent months suggest the market appears to be stabilizing.

"We still need to see a consistent increase, and that's not happening now," he says. "Hopefully, by early this summer."

A tax credit of up to $8,000 for first-time home buyers and low interest rates are helping lure some buyers into the market. The average interest rate on a 30-year fixed mortgage is 4.80%, down from 4.82% last week, Freddie Mac said Thursday.

Home sales were higher than a year ago in Minneapolis, Northern Virginia, Las Vegas, Phoenix and most areas of California and Florida, where prices have taken large hits.

And in one promising sign, the inventory of unsold homes is beginning to shrink. Total housing inventory at the end of March fell 1.6% to 3.74 million existing homes available for sale.

Much of that inventory must be absorbed before prices will stabilize.