It's more common in the South.
From what I read (yeah, I actually went and looked this crap up because I wasn't sure that I was right about the terminology, when I asked that question is was an honest question first because farmers markets are not just "on the side of the road" secondly because watermelon is just not sold that often here), this is because of the growing season. Oddly enough this is what created the stereotype.
Watermelon is easy to grow and therefore "cheap" in the South, as well as some other stereotyped foods (chitlins, greens, chicken, etc.). The poor often ate these foods, however being racially motivated back then the snobs associated these foods specifically with black people, ignoring that poor whites also ate the foods or using it to make poor whites as equal to the inferior n-words.
Basically, talking about "selling watermelons", etc. was a definite racist term once the stereotype was set. While the term isn't as grossly racist as the n-word or others, it was a way to talk down black people....
Nowadays the terms are not taken as often as directly racist, but the statement sure could have been modified to avoid even the appearance and to make the actual point. Using racially charged terms when speaking of the current President isn't the wisest of moves. Had he changed just one word...
