Blame it on the Rain

NAR attributes the worst month to month drop in existing home sales in 18 years to "unusually" bad weather in February. Well the weather was like it always was in February - cold and rainy. More than likely the increase of sales the previous three months was due to unusually warm weather. See the weather can be used as any excuse. How the world works they have an interesting metric for tracking new housing starts - remittances

Monthly remittances from the U.S. to Mexico have dropped every month since their peak of $2.6 billion in May 2006 -- shortly before new-home construction in the U.S. plunged. In February 2007, the latest month for which data are available, remittances to Mexico had slowed to $1.7 billion.

New housing starts have been coasting on builders using their existing permits to continue building. In other words they are building what they have already permitted but aren't seeking as many new permits.