By Lucia Mutikani
WASHINGTON, Nov 24 (Reuters) - Sales of previously owned U.S. homes fell in October, with the median home price notching its biggest drop on record as tough economic conditions kept buyers on the sidelines, data showed on Monday.
Adding to the gloom for the U.S. economy, a separate report from the Federal Reserve Bank of Chicago showed its National Activity Index contracted again in October, staying mired in negative terrain for 15 straight months.
Markets largely shrugged off the reports. Stocks on Wall
Street surged amid euphoria over the U.S. government's decision
to inject $20 billion into Citigroup
Also garnering attention was President-elect Barack Obama's announcement of his economic team to navigate the financial crisis.
Markets welcomed the selection of veterans Timothy Geithner, the president of the New York Federal Reserve Bank, as Treasury secretary and Lawrence Summers, who was Treasury secretary under President Bill Clinton, as director of the National Economic Council.
Obama, speaking at a news conference, noted the wealth of experience his team would have and stressed this would help his administration's efforts to get the embattled economy back on track as soon as it took over in January.
News on the dire state of the economy was not lacking. The National Association of Realtors said the pace of sales of existing homes in the United States fell 3.1 percent in October to a 4.98 million-unit annual rate. This was slightly below economists' expectations for a 5.00 million-unit pace.
On an annual basis, sales were down 1.6 percent on the 5.06 million-units sold in October last year.
"Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions," NAR chief economist said Lawrence Yun told reporters.
The inventory of existing homes for sale slipped 0.9 percent to 4.23 million from 4.27 million in September. The median national home price declined 11.3 percent from a year ago to $183,300, the lowest since March 2004 when the median price was $183,200, the NAR said.
The percentage drop in prices was the biggest since the NAR started keeping records in 1968.
Analysts said even though housing had become more affordable, sales were likely to remain depressed because of tight access to credit and mounting job losses.
MOUNTING LAYOFFS
"House sales likely sagged further in November amid tightening credit and mounting layoffs. Adverse feedback from the worsening economy and credit crisis threaten another leg down in housing markets," said Sal Guatieri, an economist at BMO Capital Markets in Toronto.
The housing malaise, which triggered a global financial crisis, has infected other sectors of the broader economy, translating into the highest unemployment rate in 14 years and a record drop in retail sales.
Analysts say stability in the housing sector is key to any recovery in the U.S. economy, which independent surveys say is in recession.
"We have favorable affordable conditions, but we need more than that to give buyers with jobs the confidence they need. Without home price stabilization, there will not be an economic recovery," NAR's Yun said, adding that distressed sales were accounting for 45 percent of sales.
In the Chicago Fed's report, while the index improved to minus 1.06 in October from a revised minus 3.11 in September, it has stayed below trend growth for 15 straight months dating back to August 2007.
The index's three-month moving average also moved up, off the lowest level since January 1982. The measure, which smooths out monthly fluctuations, was minus 2.09 in October against September's minus 2.16, previously reported at minus 1.78.
When the three-month value is below minus 0.70 following a period of economic expansion, there is "an increasing likelihood that a recession has begun," the Chicago Fed said. The three-month moving average has been below minus 0.70 every month since February.
(Additional reporting by Dan Burns in New York; Editing by Chizu Nomiyama)