National median sales prices of existing homes fell from year-ago levels in August for the first time in 11 years and just the sixth time in the past 38 years, according to the National Association of Realtors (NAR).

The NAR announced today that the national median price of an existing home fell 1.7 percent year-over-year to $225,000. It is the first time since April 1995 that median prices have fallen on a year-over-year basis. It also is the second-largest decline in the 30-year history of the realtors' survey.

The NAR reported that sales of existing homes fell 0.5 percent in August to a seasonally adjusted annual rate of 6.30 million. Sales have fallen five months in a row and in nine of the past 12 months. Sales are down 12.6 percent in the past year.

Existing-home sales in the Midwest were 11.1 percent lower than a year ago. The median price in the Midwest was $176,000, which is 1.1 percent below August 2005.

An analysis conducted by First American LoanPerformance, a research firm in San Francisco, indicated that the Midwest is being pounded by the deterioration of the American automotive industry. The study found that the percentage of loans in foreclosure in Michigan, Ohio, Illinois and Wisconsin reached 0.93 percent in June, nearly double the national rate of 0.5 percent.

NAR president Thomas Stevens said sellers need to lower prices to current market conditions if they want to sell within a reasonable amount of time. "In some areas, home sellers are not making sufficient adjustments in their listing price, so their homes are staying on the market and contributing to the build up in inventory," Stevens said.

Bruce Bittles, chief investment strategist for Robert W. Baird & Co. Inc., said, "As was widely expected, the Federal Reserve left interest rates unchanged last week. Growing evidence that the U.S. economy is losing momentum due to a weak housing market is likely to keep the Fed from raising rates again this cycle."

However, Bittles doesn't expect the Fed to take action until after the November elections.

"Additional evidence of economic deterioration was found in the Philadelphia Fed

Report last week that showed the largest drop in activity since January 2001. As a result, the next move by the Federal Reserve is expected to be to cut short-term interest rates. The Fed's Open Market Committee does not meet again until Oct. 24, just before the elections. With the Fed reluctant to appear biased, the potential for the earliest cut in rates is not likely until the first quarter of 2007," Bittles said.