Despite a 15 percent drop in national housing prices in April, the number of home sales for the month fell 3.5 percent compared with the same period last year, the National Association of Realtors reported today.

There was some good news. As the housing market entered the traditional spring buying period, the sale of existing homes rose almost 3 percent compared with March.

First-time buyers, taking advantage of the tumbling home prices, low interest rates and an $8000 federal tax credit incentive, made up 40 percent of all housing transactions for the month. Most sales were in the lower price range, NAR reported. Sales started to pick up for houses in the mid-price range, as expected for the season, but the most expensive homes continued to just sit on the market.

One obstacle to the sale of high-end homes is the frozen jumbo mortgage market,Lawrence Yun, NAR’s chief economist, said in a statement. He suggested that the Federal Reserve buy up the loans to restore liquidity.

Nationwide last month, the median price for an existing home was $170,200, NAR reported. That is a 15.4 percent decline from April 2008. NAR attributed the drop to the sale of bank-owned homes, which made up 45 percent of all sales.

As housing prices continue to fall, one in every five homeowners owes more on their home than the house is worth.
 
Foreclosures were up 32 percent in April compared with last year, real estate data firm RealtyTrac reported last week.
 
Center on Responsible Lending predicts more than 2 million new home foreclosures this year. Foreclosures remain driven by a rise in unemployment and employees working fewer hours so that even homeowners with stellar credit may find it impossible to keep up with their monthly mortgage payments. 

Addressing the problem, President Obama last week signed off on a compromise loan modification bill aimed at helping distressed homeowners. However, critics doubt its impact. The measure’s key element – allowing bankruptcy judges to rework the mortgage terms – was dropped due to pressure from the banking sector. It remains solely up to the bank whether to change the terms of the loan.