By Alan Zibel
AP Real Estate Writer
Washington — Sales of previously occupied homes fell in June and are expected to keep sinking, indicating that the housing market’s troubles are likely to drag on the economic recovery.
Sales fell 5.1 percent to a seasonally adjusted annual rate of 5.37 million, the National Association of Realtors reported Thursday. Economists polled by Thomson Reuters had expected sales of 5.18 million.
The report counts home sales once a deal closes. Last month’s report captured some buyers receiving federal tax credits of up to $8,000 that boosted sales this year. Buyers initially had to close their purchases by June 30, but Congress extended the deadline to the end of September.
Since the tax credits expired, the number of people buying homes has fallen sharply, despite lower prices and the lowest mortgage rates in decades. The situation has been worsened by high unemployment, tight lending standards and rising foreclosures.
“The economy and the housing market are going to remain stagnant for a long time,” said Sam Khater, senior economist at real estate data provider CoreLogic. “There’s nothing that’s going to propel sales anytime soon. It’s all about jobs and income growth.”
Many homeowners are unable to move because they owe more on their properties than their mortgages are worth. That means they haven’t been able to take advantage of the lowest mortgage rates in decades.
The average rate for 30-year fixed loans this week was 4.56 percent, down from 4.57 last week, mortgage company Freddie Mac reported Thursday. That’s the lowest since Freddie Mac began tracking rates in 1971.
The last time home loan rates were lower was during the 1950s, when most mortgages lasted just 20 or 25 years.
As sales have slowed, the supply of unsold homes on the market has risen 2.5 percent to nearly 4 million. That’s a nearly nine-month supply at the current sales pace, the highest level since August. It compares with a healthy level of about six months.
Sales are likely to keep falling for three to four months, said Lawrence Yun, the Realtors’ chief economist. That would likely boost the supply of unsold homes to more than 10 months for the first time since the spring of 2009. And it could push down home prices.
“It’s still a fragile situation in the housing market,” Yun said.
Home sales are down 26 percent from the peak — 7.25 million in September 2005. But they have climbed 19 percent from the low of 4.5 million hit in January 2009 — the lowest level of the recession.
With the tax credit gone, sales could fall below that level in the coming months, before inching up in the fall, said Credit Suisse economist Jonathan Basile. Consumers’ fear about the economy is the main reason.
“They believe they’re going to earn less money,” Basile said. “When your income expectations are negative, you’re going to be more cautious with your money.”
The drop in June sales was led by a more than 9 percent decline from a month earlier in the West. Sales were down 7.5 percent in the Midwest and down 6.5 percent in the South. But they rose nearly 8 percent in the Northeast.