New Zealand is awash with unsold houses which could take nearly a year to clear.

The Institute of Economic Research's principal economist, Shamubeel Eaqub, said Real Estate Institute figures out yesterday showed the market had weakened considerably and he noted extremely low turnover - 5029 sales nationally last month compared with 10,145 in February 2005.

"According to realestate.co.nz there were 54,381 homes for sale in February. There were 5029 sales in February - at that rate it will take 11 months to clear the current inventory."

Last year, the market had seven to eight months of inventory.

"Sales are stuck at very low levels and the market is awash with unsold homes," Mr Eaqub said.

The market's poor state was also reflected in days-to-sell rising from 34 days in mid-2009 to 39 days last month on a seasonally adjusted basis, he said.

REINZ figures showed the national sale price static at $350,000 from January to February and down $10,000 from December's $360,000.

Auckland's median rose by $3500 in the month from $450,000 to $453,000 but has now fallen below November's $470,000. Agents sold 1578 Auckland houses last month, below November's 2192 when REINZ said the market had recovered.

Prices in the Glendowie, Kohimarama, Meadowbank, Mission Bay, Orakei, Parnell, Remuera, St Heliers, St Johns areas fell from December's $820,000 median to $730,000 last month.

Mt Albert's $610,000 December median fell to $475,000 in January but recovered to $541,000 last month. Takapuna/Milford's January $502,000 median rose to $650,000 and Devonport's $745,000 was up to $800,000.

Mr Eaqub said the national picture was clouded by a small turnover, meaning median prices were not a reliable indicator.

"Valuations are stretched and there is risk of a downward correction," he said.

"The weak level of home sales reflects the lagging effects of rising mortgage rates. Policy uncertainty may also be discouraging activity. Housing is also a very good barometer of the economy. The current depressed level of home sales suggests the economy is not yet out of the woods and the real estate industry is not in a pretty shape."

Alastair Helm, chief executive of realestate.co.nz, which is half-owned by REINZ, noted a big upturn in new listings.

The website had just got about 5000 new listings and if this continued, it could have 15,000 new listings by the end of this month, he said.

"I'm quite surprised at how low these figures are. They are down on last February and given that February is generally the third-highest month for sales, it makes for interesting reading."

ASB economist Jane Turner said the latest figures confirmed that the market was losing momentum and she blamed the Government for creating an unstable situation.

"The Government has left the door open to two potential options: removing the ability to claim depreciation, recommended by the Tax Working Group, or ring-fencing tax losses from property so they cannot be used to offset other sources of income," she said.

"We expect house sales and prices will be weighed down by uncertainty over tax changes until the Budget at the end of May."

Deutsche Bank chief economist Darren Gibbs said the level of sales was extremely low and the number of listings was increasing, resulting in median selling time increasing notably.

ANZ economist Mark Smith described the sector as exhibiting a "dead cat bounce", showing a relatively timid volume rise.