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 country.
Sales were particularly weak among homes priced in the lower to middle ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.
WWJ and Fox 2 Business Editor Murray Feldman says, despite the bad news, we are starting to see signs of an economic recovery in Michigan:
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.
“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 can’t 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 on April 30 and the market has been hobbled since.
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.