U.S. Economy: Existing Home Sales Fall, Prices Drop First Time (Courtney Schlisserman)

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By Courtney Schlisserman

(Bloomberg) -- Sales of existing homes in the U.S. fell more than forecast in December, capping the biggest annual slump in 25 years and the first decline in prices since the Great Depression.

Purchases fell 2.2 percent to an annual rate of 4.89 million, the National Association of Realtors said today in Washington. For all of last year, sales of single-family homes declined 13 percent and prices dropped 1.8 percent, the first decrease since records began in 1968 and probably the first since the 1930's, the group said.

Falling property values and stricter borrowing terms will lead to more foreclosures and depress housing for most of this year, economists said. Investors anticipate the Fed will cut interest rates again next week in an effort to prevent the downturn from exacerbating weakness in the broader economy.

``There is likely to be little or no increase'' in gross domestic product this quarter, Harvard University economist Martin Feldstein told the Senate Finance Committee in Washington today. ``The probability of a recession in 2008 now exceeds 50 percent. If it occurs, it could be deeper and longer than the recessions of the recent past.''