The Slump Persists: Home Sales Tumble Across US

Sales of existing homes tumbled more sharply than expected in June, pushing activity down to the lowest level in more than a decade.

Brochures sit in a rack outside an existing home for sale in Denver on Sunday, July 20, 2008. Sales...

Brochures sit in a rack outside an existing home for sale in Denver on Sunday, July 20, 2008. Sales of existing homes fell more sharply than expected in June as the housing industry continued to be bruised by the worst slump in more than two decades. (AP Photo/David Zalubowski)

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With an already huge glut of homes on the market, median prices fell compared to a year ago and analysts predicted prices would keep falling until next spring as tighter credit, a slipping job market and rising foreclosures scare potential buyers away.

The National Association of Realtors reported Thursday that sales dropped by 2.6 percent last month to a seasonally adjusted annual rate of 4.86 million units, the slowest sales pace since the first quarter of 1998.

The decline was more than double the 1 percent drop that economists had been expecting and left sales 15.5 percent below where they were a year ago.

The downward slide in sales depressed prices, too. The median price for a home sold in June dropped to $215,100, down by 6.1 percent from a year ago. That was the fifth largest year-over-year price drop on record.

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Inventories of homes on the market rose by 0.2 percent to 4.49 million units, meaning it would take 11.1 months to exhaust the current backlog at the June sales pace, the second highest level in the past 24 years. The glut of unsold homes is being made worse by a rising wave of foreclosures.

The steeper-than-expected fall in home sales abruptly ended a stock rally being driving by good earnings news. The major indexes fell about 2 percent, including the Dow Jones industrial average, which lost more than 280 points.

Sales of existing homes dropped in all regions of the country in June except the West, which posted a 1 percent sales increase. Sales fell by 6.6 percent in the Northeast, 3.4 percent in the Midwest and 3.1 percent in the South.

Analysts said the slight sales rebound in the West reflected big price declines in many parts of California that are helping to make homes affordable once again.

"California is on the leading edge of a housing recovery and that is because prices are falling fast in many areas and that is restoring affordability," said Mark Zandi, chief economist at Moody's Economy.com. But he predicted any rebound nationally will be slow in coming, reflecting the continued surge in foreclosures as many subprime mortgages reset to higher rates.