Sales of previously owned homes plunged 27 percent in July to the lowest level in 11 years, as the housing sector struggled to gain its footing in the slowing economy.
Last month sales fell to a seasonally adjusted rate of 3.83 million, the largest monthly drop in 42 years, according to data released by the National Association of Realtors on Tuesday. The findings were considerably worse than had been expected; analysts had predicted a drop of 14 percent.
Previously owned homes make up about 90 percent of the market.
The soft sales pace is expected to continue for the next several months. If the economy can add jobs the pace could pick up quickly, as mortgage rates continue to drop to new record lows and homes remain affordable.
“Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” said Lawrence Yun, NAR's chief economist.
“However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs."
June's sales pace was revised downward to 5.26 million after the April 30 expiration of a homebuyers tax credit that provided up to $8,000, boosting sales through the spring.
The number of previously owned homes on the market rose 2.5 percent to 3.98 million. At this sales pace it would take 12.5 months to sell off the nearly 4 million homes on the market.
As sales plummeted, the median sales price was up 0.7 percent from a year ago, to $182,600.