Home resales dropped last month, and prices fell by the most on record, signaling a deepening recession in the housing market.

Purchases of existing homes declined 3.1% from September and 1.6% from with a year earlier, to an annual rate of 4.98 million units, the National Association of Realtors said Monday. The median price fell 11.3% from a year earlier — the largest decrease since the trade group started keeping records in 1968 — to $183,300.

"Underlying demand appears very weak. It seems many sales are coming from cheap prices on foreclosed properties," said Sal Guatieri, a senior economist at Bank of Montreal's BMO Capital Markets. "Home sales will continue to fall over the next few months, because of tightening credit conditions."

His firm's forecast of a 4.97 million sales rate was the closest among the 67 economists surveyed by Bloomberg.

Last year 5.65 million homes were resold.

The resale rate has averaged around 4.96 million this year, though in June it dropped to 4.86 million, the lowest in a decade.

At the current sales rate, the supply of previously owned homes on the market at the end of October would take 10.2 months to clear, versus 10 months at the end of September.

The median price was the lowest since March 2004. Prices fell in all regions of the country, led by the West.

The realty group's report showed that resales of single-family homes declined 3.3% from September, to an annual rate of 4.43 million.

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