Home sales up a robust 3.9%

Sales of existing homes rose in February by the largest amount in nearly three years, but worsening troubles in sub-prime mortgages were viewed as a roadblock to a full-fledged rebound.

The National Assn. of Realtors reported Friday that existing-home sales climbed 3.9% last month, pushed higher by a milder-than-normal winter that boosted sales in areas of the country such as the Northeast.

It was the biggest one-month gain since March 2004 and left sales at an annual rate of 6.69 million units, a pace that was still 3.6% less than a year ago.

Even with the improvement in sales, the median price of homes kept falling, dropping to $212,800 in February, down 1.3% from a year earlier.

It marked a record seventh straight decline in prices compared with the same month a year earlier.

The price weakness was a far cry from the double-digit price increases that were being recorded during housing’s boom years.

After five years in which sales set records, sales of existing homes dropped 8.5% last year, the biggest annual decline in 17 years.

Many economists believe sales will fall again this year as the housing industry continues to work through an adjustment after a boom that was fueled by the lowest mortgage rates in four decades and a speculative frenzy as investors rushed to cash in on soaring real estate prices.

Economists are concerned that rising defaults in sub-prime mortgages, those offered to borrowers with weak credit, will trigger tighter lending standards that will make it harder for new buyers to qualify for loans. As borrowers default on their mortgages, that will dump more properties onto an already glutted market.

“The sub-prime mortgage market has taken a beating because of an unexpected surge in defaults,” said Patrick Newport, an economist at Global Insight Inc.

He predicted that home prices would fall in 2007, which would be the first decline on an annual basis on record.

By region of the country, existing-home sales were up 14.2% in the Northeast, a gain attributed in large part to warmer-than-normal weather.

Sales were up 3.9% in the Midwest and 1.6% in the South.

Sales were unchanged in the West, which analysts blamed in part on a reluctance by sellers in that region to cut prices to attract buyers.