Sales of single-family existing homes plummeted 27% in July from the previous month as the expiration of homebuyer tax credit sucked all the oxygen out of the market. The sales reading was the worst in 15 years.
"Hopefully this pause will last two to three months and not longer," said National Association of Realtors economist Lawrence Yun.
Barclays Capital noted that, "Overall, the July report was notably worse than expectations and shows that the housing market has not yet found a bottom following the end of the stimulus measures."
According to figures compiled by NAR, sales fell 7.2% in June and 1.6% in May after the expiration of the tax credit on April 30.
NAR said sales of previously owned single-family homes fell to a seasonally adjusted annual rate of 3.37 million in July from a 4.62 million rate in May.
Sales of existing condominiums and co-ops fell 28% in July from June. The big drop in sales was expected after RE/MAX reported last week that its sales had dropped 30% in the month of July.
Scott Anderson, a senior economist at Wells Fargo & Co., said there could be a "modest recovery" off of the low July sales level.
"But I think the trend will be pretty flat at historically low levels probably until next spring," he told National Mortgage News.
Given the uncertain economic outlook and expectations that mortgage rates will remain low for sometime, "potential homebuyers will take a wait and see approach," he said, adding that consumers have no sense of urgency to go out and purchase a home.
Wells Fargo economists expect house prices could fall 6% nationally between now and the end of 2011. In some metropolitan areas, prices could fall by 5% to 10%, the bank believes.
