(NEW YORK) Sales of US previously-owned homes fell in March after jumping a month earlier by the most in more than five years, indicating the market will remain depressed for much of the year.

Purchases decreased 3 per cent to an annual rate of 4.57 million, lower than forecast, from 4.71 million in February, the National Association of Realtors said yesterday in Washington. The median price slumped 12 per cent from a year ago and distressed properties accounted for about 50 per cent of all sales.

Record-low mortgage rates and a foreclosure-driven plunge in prices are making houses more affordable, helping the market stabilise following the biggest slump since the Great Depression. Even so, mounting job losses dim prospects for an immediate recovery.

'This fits with an idea of stabilisation of housing demand,' said Jonathan Basile, an economist at Credit Suisse Holdings Inc in new York. 'We've seen housing affordability go up across the country. The bad news has been diminishing.'

Shares of the largest homebuilders were down following the report, while stocks overall were little changed.

Another report showed the number of Americans filing first-time claims for unemployment insurance rose by 27,000 people last week to 640,000 people as forecast, while total benefit rolls reached a record, indicating the labour market continues to deteriorate.

Economists forecast resales would fall to a 4.65 million annual rate, according to the median of 69 projections in a Bloomberg News survey. Estimates ranged from rates of 4.37 million to 4.9 million.

Last month's sales pace was still higher than the decade-low 4.49 million reached in January.

Purchases were down 7.1 per cent compared with a year earlier.

The number of houses on the market dropped 1.6 per cent to 3.74 million. At the current sales pace, it would take 9.8 months to sell those homes, up from 9.7 months in February. The agents' group has said that a five to six months' supply is consistent with a stable market.

This article was first published in The Business Times .