In the latest new home sales report, home sales in March plunged to the lowest level since October 1991. New home sales dipped once again last month, dropping by 8.5% to 526,000 units annualized.

Every region in the country was down, and, according to Stephen Stanley from RBS Greenwich Capital, "there is no way of parsing the data to come to an upbeat conclusion. I would argue that the balance of power in the real estate market has moved back to the existing side."

Stanley said that at different points in 2006, it appeared that new homes were selling better than existing homes, likely because builders were quicker to bring down their prices compared with homeowners.

Currently, he said that with builders having already cut prices sharply on their inventories, "the existing side is catching up, as sellers gradually accept that the market has moved and an increasing number of foreclosed properties hit the listings, putting both direct and indirect pressure on offer prices." Stanley said that in the past six months, existing home sales have dipped 3 1/2% while new home sales have gone down significantly by 24%.

New home inventories continued to slip in March, but not nearly as fast as sales, according to a report from RBS Greenwich. Because of this, the months' supply of new homes on the market increased sharply in March to 11.0, which is the highest reading since 1981, RBS Greenwich said.

Still, the absolute stock of new homes on the market dropped for the tenth consecutive month. "The breakdown by stage of processing shows (finally) encouraging signs," Stanley said, adding that  the stock of finished new homes for sale dropped for a second straight month, although it remains double the norm and will need to come down by 100,000 units to get where it probably needs to be.

Meanwhile, the stock of homes for sale that are still under construction fell to the lowest level since March 2003. RBS Greenwich said that this series has now gotten down to a "normal" level, which suggests that housing starts have dipped every bit as sharply as new home sales.

Residential construction activity will clearly continue to weaken throughout this year, RBS said, but the pace of decline should start to wane if new home sales bottom out. The firm expects this to happen in 2Q08, even if the March figures are "daunting."

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