Existing home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 27.2% to a seasonally adjusted annual rate of 3.83 million units in July from a downwardly revised 5.26 million in June, and are 25.5% below the 5.14 million-unit level in July 2009.

Sales are at the lowest level since the total existing home sales series launched in 1999, and single family sales, accounting for the bulk of transactions, are at the lowest level since May of 1995.

The homebuyer tax credit was worth USD8,000 and could be claimed by purchasers of a qualifying home up to July 1, 2010 if a binding contract was entered into by April 30, 2010 and the sale was closed within 60 days. Recently passed legislation has extended the closing deadline until September 1.

Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “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. 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."

“Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses,” Yun added. “Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward.”