Sales of Existing Homes Drop
To Lowest Levels Since 2004

Sales of previously owned homes fell in July to the lowest level in 2 1/2 years and the inventory of unsold homes climbed to a new record high, fresh signs that the housing market has lost steam.

Home resales fell to a 6.33 million annual rate, a 4.1% decline from June's revised 6.60 million annual pace, the National Association of Realtors said Wednesday. June resales were originally seen at 6.62 million.

The NAR report shows a continued weakening in the housing market, with inventories up sharply while prices are softening, with July's pace off 11.2% from a year ago.

"Many potential home buyers have been on the sidelines, some 'kicking the tires,' but mostly waiting for sellers to compromise on prices and terms," NAR chief economist David Lereah said.

He said higher interest rates damped sales. The average 30-year rate was 6.76% in July, up from 6.68% in June, according to Freddie Mac.

The level of resales in July was below Wall Street expectations. Analysts predicted a 6.55 million rate of sales of previously owned homes.

The inventory of unsold homes rose 3.2% to a record 3.856 million, a 7.3- month supply at the July sales rate, the highest since April 1993. The past year has seen the sharpest increase in inventories on record, Mr. Lereah said.

Mr. Lereah said he still expects a "soft landing" for the housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again -- as some analysts have said is a possibility.

The Federal Reserve earlier this month decided to halt a rate-raising campaign that had pushed interest rates steadily higher over the last two-plus years to fend off inflation. The Fed's goal is to raise rates sufficiently to thwart inflation but not enough to hurt the economy.

On Tuesday, Toll Brothers Inc., the closely watched luxury-home builder, cut its fiscal full-year earnings projection for the third time this year and declined to offer an estimate for the next year, indicating that the deterioration in the U.S. housing market will continue for the foreseeable future. A day before, home-improvement chain Lowe's said high gas prices and a slowing housing market weighed on results.

Last week the National Association of Home Builders reported that confidence among builders sank to a 15-year low.

The median price of a home sold last month was $230,000. That was up just 0.9% from the same month last year and marked the smallest year-over-year increase since May 1995. The median price is the middle point, where half sell for more and half sell for less.

"Boom markets are cooling significantly," said Mr. Lereah.

Existing-home sales were down in the four regions of the U.S. By region, sales dropped by 5.4% in the Northeast. They fell by 5.9% in the Midwest and 1.2% in the South. Sales declined by 6.4% in the West.

"Prices need to come down to bring back buyers," Mr. Lereah said. Sales of condos rose 2.8% in July to 818,000. Sales of single-family homes fell 5% to 5.51 million.

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