A home is shown for sale in Springfield, Ill. Year over year, July home sales dropped 25.5 percent, according to the National Association of Realtors.
A home is shown for sale in Springfield, Ill. Year over year, July home sales dropped 25.5 percent, according to the National Association of Realtors. Seth Perlman/AP
Sales of existing homes plunged last month to the lowest level in 15 years, dashing hopes that a rebound in housing would jolt the economy out of its post-recession malaise.
The National Association of Realtors reported Tuesday that July's sales dropped 27.2 percent, to a seasonally adjusted annual rate of 3.83 million — the biggest monthly decline on record dating to 1968 and worse than what most analysts had feared.
"The decline wasn't unexpected, but perhaps the amount of the decline was," Paul Bishop, NAR's vice president for research, told NPR.
Celia Chen of Moody's Economy.com, who specializes in housing economics, called the latest data "unprecedented."
July's numbers were the third consecutive monthly drop: Sales of existing homes fell 5.1 percent in June and 2.2 percent in May, according to the NAR. Year over year, July sales sank 25.5 percent.
Home sales have tumbled since a stimulus package tax credit for first-time buyers expired at the end of April. In addition, banks have effectively shut out many potential buyers by tightening lending requirements.
"There are a lot of things in the mix," Bishop said. "The biggest is no doubt the expiration of the tax credit, but it's still only one factor."
Potential buyers are also concerned about whether homes — which have precipitously lost value over the past three years — are a good investment right now even though mortgage rates are at their lowest in decades. High unemployment and fears of future layoffs also have kept people on the sidelines.
Some analysts also believe buyers and sellers are in a standoff over home prices, and that sellers are maintaining unrealistic expectations about their home values and listing properties on the high end.
Meanwhile, foreclosures are running about 10 times higher than before the housing market peaked in 2006.
In past recessions, strengthening home sales have generally led a recovery. This time around, the continued weakness in the housing market "adds to the dangers that the economy might fall into a double-dip recession," Chen told NPR.
"Housing right now is unlikely to be ... a factor that is going to lead the economy out of recession. It simply is too weak," she said, adding that "without stability and a little bit of growth in housing, it will be difficult for the broader economy to generate a more self-sustaining recovery."
The NAR's chief economist, Lawrence Yun, believes the market will pick up again in the next few months if consumer confidence starts coming back. But he acknowledged that the job situation is a wild card.
"If unemployment goes higher than 10 percent, then the housing market is really looking at trouble," Yun told NPR.
At the current sales pace, the NAR said it would take 12.5 months to sell off the glut of 4 million unsold homes currently on the market. The median sale price was $182,600 last month, down 0.2 percent from June.
But the backlog of existing homes should be drawn down as the economy recovers if new construction remains weak, economists think.
"It's kind of in limbo," said William Wheaton, professor of economics at the Massachusetts Institute of Technology.
"I think when the economy recovers — or starts to recover — we'll see a pickup in sales," he said. "As long as the level of building activity stays low, the inventory should continue to decline and that will set the stage for a recovery in prices."
NPR's Jeff Brady and Paul Brown contributed to this report, which also contains material from The Associated Press