Early signs of a decent spring selling season in the U.S. housing
market, as mortgage rates hit near-record lows, have been snuffed out
by the latest round of dismal data.

Sales of existing homes sank in March and the February increase was
revised lower, suggesting no imminent bottom for housing or the
16-month economic recession.

Housing affordability does keep improving and is at all-time highs
by some measures. This usually would bode well for the keenly watched
spring home sales season, when potential buyers emerge from winter
hibernation to shop in earnest.

But not this time.

It's very difficult to predict whether this is the start of the
upturn in the market. In fact, it's likely not, said Sherry Chris,
president and chief executive officer of Better Homes and Gardens Real
Estate in Parsippany, New Jersey.

Mortgage rates skidded to record lows in April. Home prices have
tumbled by about 30 percent from the mid-2006 peak, sinking more or
less depending on the region.

Once stability does return and home prices start to rise, the next shoe will drop.

Shadow inventory -- created when disillusioned sellers gain
confidence and come out of the woodwork to list their homes again --
will quickly resurface when the market starts to show signs of

More supply will pressure home prices anew.

We remain nervous ... that any meaningful increase in home sales
will prompt a new wave of supply as people who have simply not bothered
to try to sell their homes are persuaded that it is finally worth a
shot, wrote Ian Shepherdson, chief economist at High Frequency
Economics in Valhalla, New York.

At the current sales pace it would take 9.8 months to sell the
supply of unsold existing homes, according to the National Association
of Realtors. That is about double the level that suggests a more normal
supply and demand balance.

Once things start to move, there's going to be incentive for more
supply to come onto the market as well as the fact that foreclosures
are still going up, said Keith Hembre, chief economist at First
American Funds in Minneapolis, Minnesota.

Hembre roughly estimated more than one million additional housing
units could come back on the market once moving rates pick up again.
This extra inventory is going to be a huge issue ... it would
certainly cap any upside on prices.

But unemployment is at its highest in over a quarter century and
rising. Home prices are still falling. Foreclosures are at record highs
and mounting. Consumer confidence is sapped.

As consumers become more confident about the economy, about their
own jobs and net worth, that will start driving us out of this, said

Roughly half of all existing homes sold in March were foreclosures,
and a similar share of buyers were first-time homeowners. Consumers
buying for the first time are seen key to a recovery, as they aren't
burdened with a house to unload.

A federal first-time buyer's tax credit of up to $8,000 and deep discounts are luring those buyers as well as investors.

But with many home shoppers wary of getting a pink slip, the
hardest-hit housing market since the Great Depression is seen unlikely
to soon gain much traction.

In reporting record and rising foreclosure activity, RealtyTrac on
Wednesday said new problem cities will emerge as unemployment swells.

The Sun Belt states of California, Florida, Nevada and Arizona that
benefited most during the five-year housing boom early this decade
continue to suffer the biggest bust.

But markets like Manhattan and surrounding New York suburbs, long
insulated from the downturn, are losing ground as Wall Street cuts

When we look at states like Michigan with the auto problems there,
that state has been a poor performing real estate state for a long
time, said Chris. If problems arise with unemployment there, that
will certainly effect the housing market. There's no question about