The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell to 84.6 from January's upwardly revised reading of 86.2. The index stood at 107.6 in February 2007.

Economists surveyed by Thomson/IFR had predicted the index would inch up to a reading of 86.3.

A reading of 100 is equal to the average level of sales activity in 2001, when the index started. The previous low was August's reading of 85.8, recorded at the height of the credit crunch.

With house prices falling and credit continuing to tighten, many economists say the housing market is likely to worsen in the coming months, though some remain hopeful about a recovery in the second half of the year.

"The question was whether things were starting to stabilize," said Global Insight economist Patrick Newport. "Apparently they're not."

Newport predicts home sales will fall another 5% to 10% before picking up at the end of the year, while the Realtors group forecasts that sales will remain flat in the first half of the year before rebounding strongly in the second half.

The Realtors report gives an early indication of how existing home sales are likely to fare for March, because of the typical lag of a month or two between when a buyer signs a home sales contract and the closing of the deal.

Moody's Economy.com forecasts that sales of existing homes will fall 1.6% in March to an annual rate of 4.95 million units, from 5.03 million units in February. That month's 2.9% increase in sales was the first since last July.

"Despite recent steps to provide more liquidity to the mortgage market and ease financing constraints for potential buyers, access to credit remains restricted, especially for marginal buyers," wrote Aaron Smith, senior economist at Economy.com. If job losses prove worse than expected as the economy slows, "the floor forming under home sales could begin to cave in."

Lawrence Yun, the Realtors' chief economist, said that the decline in pending home sales "implies we're not out of the woods yet, though an era of successive deep sales declines appears to be over."

The Realtors group maintained its prediction that the housing market would pick up in the second half of the year, forecasting improved availability of loans for more expensive houses. It forecasts the median price of a U.S. median home prices — the point at which half homes sell for more money and half for less — will fall 1.4% to $215,800.

Some analysts say lower home prices are providing incentive for bottom-fishers to look for cheap deals, however it remains unclear how much of a boost that will provide.

"We'll have to see if these pending transactions can actually close," Mike Larson, a real estate analyst with Jupiter, Fla.-based Weiss Research said in an e-mail. "My concern is that stingier lending standards are leading to more deals falling apart."

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