July home sales lowest in 15 years

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 record dating back to 1968, and sharp declines were recorded in all regions of the country.

In Yuba-Sutter, the number of home sale closings fell from 153 in June to 105 in July after averaging about 150 sales since March, according to Brad Burris, co-owner and managing broker of ERA Showcase Real Estate of Yuba City. The area's inventory reached 713 homes as of Monday, the highest in 18 months.

The plunge in home sales also magnified fears about the broader economy.

"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."

Locally, Burris called the fall-off in home sales a belated reaction to the expiration of tax credits that aided first-time buyers, but expired this spring. Mid-Valley home sales average about 45 days, but can extend as long as three months, he said.

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.

"Banks are taking extra precautions, asking for more documentation, trying to save themselves from themselves," Burris said Tuesday. "We hear from local lenders that when a file goes to underwriting, they seem to look more and more. It's a little frustrating, but that's the market we're in."

Sales were particularly weak among homes in the lower- to mid-priced ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 percent.

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. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."

"I think we've seen the bottom, but I understand the buyer's perspective: Do I buy today and lose tomorrow?" Burris said. "But history shows if you don't buy today you pay more tomorrow, in price or interest rates."

The housing market is also being hampered by the weakening economic recovery. Unemployment remains stuck at 9.5 percent nationally — and as high as 20 percent in Yuba-Sutter - and many potential buyers worry they might not have a job to pay the mortgage.

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.

Appeal-Democrat reporter Howard Yune contributed to this report.