WASHINGTON Sales of previously occupied homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.
Julys sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.
The plunge in home sales also magnified fears about the broader economy.
The housing market is undermining the already faltering wider economic recovery, said Paul Dales, U.S. economist with Capital Economics. With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse.
Sales were particularly weak among homes in the lower- to mid-priced ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.
As sales have slowed, the inventory of unsold homes on the market grew to nearly 4 million in July. Thats a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.
One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices havent bottomed out.
It really is a self-fulfilling prophecy, said Aaron Zapata, a real estate agent in Brea, Calif. If all buyers perceive that home prices are coming down, then they will stop making offers and home prices will come down.
The housing market is also being hampered by the weakening economic recovery. Unemployment remains stuck at 9.5 percent, and many potential buyers worry they might not have a job to pay the mortgage.
Prices have fallen in part because foreclosures are running about 10 times higher than before the housing bust. Though the average rate for a 30-year fixed mortgage has sunk to 4.42 percent, many people cant qualify because banks have tightened their lending standards.
Home sales picked up in the spring when the government was offering tax credits. But the tax credits expired April 30, and the market has been hobbled since.
The drop in Julys sales was led by 35 percent plunge in the Midwest. Sales were down 30 percent in the Northeast, 25 percent in the West and 23 percent in the South.
The median sale price was $182,600, up 0.7 percent from a year ago, but down 0.2 percent rom June.