Drop in July home sales renews economic worries

WASHINGTON - The end of a popular government stimulus program drove home sales in July to their lowest levels in more than a decade, fueling fresh concerns about the economic recovery.

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. It was the largest monthly drop in the four decades that records have been kept.

Potential buyers are hesitating because they think home prices still have further to fall. Potential sellers - those with the stomach to put their homes on the market at all, anyway - are reluctant to lower their prices.

The drop was much bigger than expected, as the boost evaporated from a now-expired federal tax credit that had been driving sales this spring. The plunge came despite rock-bottom rates on home loans.

"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 all four regions of the country. The worst sales drop was in the Midwest, which recorded a 35 percent decrease. Sales tumbled 29.5 percent in the Northeast.

On Long Island and Queens, the latest numbers show 1,858 closings in July and 3,985 in June, a 53.4 percent drop, according to the Multiple Listing Service of Long Island, which said June was a 15-year high. Those figures are expected to change because many agents are late in reporting closings to MLS, but such a steep drop was not unexpected.

Buyers rushed to meet what was then a June 30 closing deadline to claim up to $8,000 in home buyers' tax credits from the federal government, which pulled future purchases into June. Congress and President Barack Obama later extended the deadline to midnight Sept. 30, expected to be another key month for closings.

In the past 15 years on Long Island and in Queens, the all-time low for home sales was February 1995, with 1,133 closings, according to the Multiple Listing Service of Long Island. It came in the wake of layoffs of thousands of workers by major firms and governments, as well as massive state and local budget cuts.

The housing market pain is being felt unevenly from state to state and city to city. Some markets, such as San Francisco and Denver, are rebounding even as others - Las Vegas, Chicago and Palm Beach, Fla. - languish.

Concern over the summer swoon reverberated Tuesday from Wall Street to the White House. The Dow Jones industrial average fell more than 1 percent, briefly falling below 10,000.

"You are seeing the sales drop off a cliff again, and that is really starting to scare people," C.J. Jones, head of institutional trading at Nollenberger Capital Markets said Tuesday. "Are we going to have a double dip? Nobody knows."

White House Deputy Press Secretary Bill Burton acknowledged the drop was likely largely due to the expiration of the home buyer tax credit and called the decline a "tough number."

The number of homes lingering on the market has swelled to nearly 4 million in July. At the current pace of sales, it would take about a year and two weeks to sell all those homes and get them off the market. A healthy level is six months.

The one bright spot of the report was that the national median home price was $182,600 in July, up 0.7 percent from a year ago. With Ellen Yan