Previously occupied home sales sink 27 pct. to lowest level
since 1995 as economy weakens
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.
July's 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 plunge in home sales also magnified fears about the broader
"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.
The weakness follows a strong spring, when now-expired government
tax credits sparked sales, especially among first-time buyers of
The tax credits caused many of those buyers to speed up their home
purchases. Sales have weakened since the credits expired on April
30. As sales have slowed, the inventory of unsold homes on the
market grew to nearly 4 million in July. That's 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
haven't bottomed out.
Laurie Salaman has been trying to sell her home in New York City
for a year so she can move to the suburbs. She's had no offers,
even after cutting her listing price on the three-bedroom Bronx
home from $475,000 to $449,900.
She notes that she has upgraded the kitchen and bathrooms,
refinished the basement and put in new decks and patios. Her goal
is to take about $100,000 from the sale and put it toward the
purchase of the new house. She said she won't lower her price any
"That's my bottom price," said Salaman, 55. "If I don't get that
price, then I will hold off until the market gets a little better,"
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
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 can't qualify because banks have tightened their lending
Home sales picked up in the spring when the government was offering
tax credits. But sales have sputtered since the tax credits
The drop in July's 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 from June.
Written by: Alan Zibel and J.W. Elphinstone, AP