The owner of Flex Realty, which is selling this Middlesex Drive house in Toledo, has seen an uptick in sales this month after a rough July.
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Sales of previously occupied homes in the United States fell 27 percent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday. Potential home buyers are hesitating because they think home prices have further to fall. Potential sellers are reluctant to lower their prices.
WASHINGTON - Sales of previously occupied homes in the United States fell 27 percent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday.
The monthly drop was the largest in the four decades that records have been kept, and the plunge sent the Standard & Poor's 500 Index to a seven-week low. The S&P 500 tumbled 1.5 percent to 1,051.87.
The Dow Jones Industrial Average retreated 133.96 points, or 1.3 percent, to 10,040.45.
"The big shock is the housing numbers," said Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland.
"We probably should have expected that because the housing market has given a number of signs of weakness up to this point. … When you see the number in print, it's always a bit of a shock."
Source: National Association of Realtors
Potential home buyers are hesitating because they think home prices have further to fall. Potential sellers are reluctant to lower their prices.
"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."
While the standoff plays out, home sales are plummeting.
Sharp declines were recorded in each of the four regions the group tracks. Yet the pain is being felt unevenly from state to state and city to city.
Some markets are rebounding even as others languish.
Sellers in sluggish markets such as Las Vegas and Chicago can expect to wait an average of more than five months to sell their homes, according to real estate brokerage ZipRealty Inc. It's even worse in Palm Beach, Fla., where it takes nearly six months, longest in the nation.
In healthier markets such as San Francisco and Denver, the average wait is only about two months.
Sellers in Washington appear to have the nation's best major market; they are waiting only about a month and a half.
Home sales in northwest Ohio last month mirrored the national drop.
There were 446 homes sold in July in a dozen northwest Ohio counties, down from 738 in June and 625 for July, 2009, according to the Toledo Board of Realtors.
After home sales in souther California plunged 21.4 percent last month compared to July 2099, some owners are lowering prices. This reduction sign is bilingual.
Damian Dovarganes / AP Enlarge
The average selling price also fell to $110,406 from $117,572 in June.
James Moody, owner of Flex Realty, which sells homes throughout metro Toledo, said last month was tough.
The number of listings in July for his firm was comparable to a December, typically the worst sales month of the year.
He has a listing for a $184,900 home on Middlesex Drive in Toledo which has been for sale for 67 days, which he calls a typical time on the market.
"So far in August," he said, "we've seen an upward tick in sales. Normally August is a bad month, and then in September and October we see an uptick … But with our August, I am hopeful that we're seeing an incline."
Beyond geography, sales numbers vary depending on the price of the house.
The biggest drops in sales are among houses in the low and middle price ranges.
For example, 47 percent fewer houses in the Midwest priced between $100,000 and $250,000 sold in July than did in July last year.
By contrast, sales of million-dollar-plus houses in that region rose slightly year over year.
This spring, government tax credits helped drive sales, especially among first-time buyers of less expensive houses.
But those tax credits have expired and many people rushed to lock in sales before the tax credits ended.
Since then, the number of homes lingering on the market has swelled to almost 4 million in July.
At the current sales pace, it would take about a year and two weeks to sell all those houses and get them off the market. A healthy level is six months.
The housing market is also hampered by the weakening economic recovery.
Unemployment is stuck at 9.5 percent, and many potential buyers worry that they might not have a job to pay the mortgage.
Prices also have fallen because foreclosures are running about 10 times higher than before the housing bust.
Although the average rate for a 30-year fixed mortgage has fallen to 4.42 percent, many people can't qualify because banks have tightened lending standards.
The drop in July sales compared with June was worst in the Midwest, at 35 percent. Sales sank 30 percent in the Northeast, 25 percent in the West, and 23 percent in the South.
Nationally, the median selling price was $182,600, up 0.7 percent from a year ago but down 0.2 percent from June.
More broadly, the plunge in sales is magnifying fears that a worsening real estate market could cause consumers to pull back on spending.
The overall economy would suffer.
"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."