US house sales jump as prices dip

A market slowdown has prompted some sellers to cut their prices

US existing home sales rose at their fastest rate since March 2004 last month, despite fears of a slowdown in the property market.

Sales of existing homes rose 3.9% in February driven by a surge in activity in the North East, the National Association of Realtors (NAR) said.

However, the median price of a property dropped 1.3% to $212,800 (£108,571) compared with the same time last year.

Experts said falling prices were luring buyers back into the market.

The housing market has slowed as recent US rate increases have weighed on the market, discouraging speculators and prospective buyers alike, while rising inflation threatened to keep interest rates high.

Lending fears

However, the report also voiced concerns over the future of the sub-prime lending market - which offers mortgages to customers with poor credit histories.

The rising number of people defaulting on such mortgages has forced the sub-prime sector to tighten up on its lending methods, the NAR added.

"Our view is that the tightening in the sub-prime market will have a negative impact on home sales," NAR chief economist David Lereah said.

"It probably won't postpone the recovery (in housing) but it will slow it."

Mr Lereah added that he expected such problems to trigger a cut in demand for homes - with sales expected to fall by as much as 200,000 this year.

Experts are concerned that that should the housing market experience a significant slowdown and property values fall, this could lead consumers to rein in spending - putting a brake on the main driver of growth in the world's largest economy.