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Existing Home Sales Dip 3 Percent In March

First-time homebuyers looking for bargains snapped up about half of all homes sold last month, but the spring selling season is getting off to a lackluster start with sales falling more than expected from February levels.

Home sales fell 3 percent to an annual rate of 4.57 million in March month from a downwardly revised pace of 4.71 million units in February, the National Association of Realtors said Thursday.

Sales had been expected to fall to an annual pace of 4.7 million units, according to Thomson Reuters.

"I'd summarize the housing market as still struggling and still oversupplied but you could make the case that the patient's moved from the ICU to the long-term care wing of the hospital.," Mike Larson, a real estate analyst at Weiss Research, told CBS News.

The results were "a little disappointing" given that homes are more affordable than they've been in years and mortgage rates are near record lows, said Lawrence Yun, the group's chief economist.

The median sales price in March was $175,200, a plunge of 12.4 percent from a year ago, but higher than February's median price of $168,200. While median sales prices typically rise slightly in early spring, the 4 percent monthly increase was larger than expected.

Yun also pointed to a strong sales recovery in western cities, where prices have plunged the most. He said the rest of the country could start to see sales improve by early summer.

Real estate agents are getting calls from first-time buyers looking to take advantage of a new $8,000 tax credit. And that should give a boost to sales figures for early summer.

As unemployment grows and fallout from the mortgage crisis continues, foreclosures and distressed sales are dominating the market - especially in California, Florida, Nevada and Arizona. The Realtors group estimates that about half of sales nationwide are from foreclosures or other distressed property sales.

"You're seeing relatively strong bidding for deeply discounted foreclosed homes and short sales but weaker demand for … the traditional home put on the market by a traditional seller," Larson told CBS News.

Sales, while plummeting compared with last year in most of the country, were up by 23 percent in the West from a year ago, without adjusting for seasonal factors. For distressed Western cities, "this is a sharp recovery," Yun said.

The number of unsold homes on the market at the end of March fell 1.6 percent from a month earlier to 3.7 million. But due to the slumping sales pace, it would still take almost 10 months to rid the market of all of those properties.