UPDATE 2-U.S. existing home sales post surprise rise

(Recasts, adds analysts' views; updates markets)

By Patrick Rucker

WASHINGTON, March 24 (Reuters) - Sales of U.S. existing homes rose in February for the first time since July as prices posted a record drop from their year-ago level, but economists said it was unlikely the market had reached a bottom.

The National Association of Realtors on Monday said sales of previously owned homes rose 2.9 percent in February to a 5.03 million-unit annual rate, bucking expectations on Wall Street for a decrease.

While the rise broke a six-month streak of declining sales, prices continued to slip. The trade group said median prices fell 8.2 percent from their year-ago level to $195,900. It was the biggest year-on-year drop on record dating to 1968.

The data helped U.S. stocks build on earlier gains and undercut prices for government bonds. At the same time, the dollar rose against the euro and the yen as traders saw the report suggesting the economy may not be as weak as feared.

Still, analysts took the report with a grain of salt.

Gary Shilling, president of the investment advisory firm A. Gary Shilling & Co., said the normal dearth of sales at this time of year meant the adjustments made to the data to account for seasonal variations could have distorted the picture.

"The real number of importance is the price," he said. "Prices are declining and that's wiping out the equity of many people. People are literally under water on their houses and are walking away."