The National Association of Realtors' existing home sales report is expected to show declines in U.S. home sales abating slightly in February.

Economists expect U.S. existing home sales will fall 0.9% following a 5.3% drop in January.

Economists at IHS Global Insight said there are two competing forces at work in the U.S. housing market. Certain states, including California and Arizona, are seeing increasing home sales due to purchases of foreclosed homes at distressed prices.

However, weak demand across many other states is driving sales down, they said. The economy is shedding jobs at a frightening pace. Until this pace slows down, home sales will continue to slid, they said.

Pending home sales - which predict existing home sales one to two months ahead - fell 7.7% in January but rose 4.8% in December, providing a mixed picture.

Reports from the Mortgage Bankers Association showed double-digit percentage declines in mortgage applications in three of the four week in February.

In their weekly housing monitor report, economists at Barclays Capital agreed the sales of foreclosed homes are running against weak demand for homes due to unemployment and expectations that home prices will come down, which are creating powerful offsets.

The housing market could be flooded with inventory in February, they said. We believe that the inventory correction will be protracted due to the flood of foreclosures entering the market.

The NAR report will be released at 10 a.m. EDT.

By Megan Ainscow, mainscow@economicnews.ca, edited by Ernest Hoffman, ehoffman@economicnews.ca