The National Association of Realtors said Wednesday that home resales dropped to a 4.91 million annual rate, a 2.2% decrease from July's revised 5.02 million annual pace. July originally was seen rising 3.1% to 5.00 million.
The median home price was $203,100 in August, down 9.5% from $224,400 in August 2007. The median price in July this year was $210,300. The 9.5% drop was a record, the NAR said.
Falling prices are restraining sales, as would-be buyers wait for a better deal instead of signing on the dotted line. High inventories are driving down prices. Prices must fall further for inventories to recede.
Inventories of previously owned homes fell 7.0% at the end of August to 4.26 million available for sale, which represented an 10.4-month supply at the current sales pace. There was a 10.9-month supply at the end of July. July inventories totaled 4.58 million, which was a record high.
NAR economist Lawrence Yun welcomed the big drop in inventories, the largest since 9.4% in December 2006. "Home prices will not stabilize as long as inventories remain high," he said.
Lenders continued in the second quarter of 2008 to tighten their standards on home loans, the Federal Reserve's latest quarterly survey of senior loan officers at U.S. banks showed. About 75% said they tightened standards on prime mortgages, up from 60% in the previous survey, released in May.
"Home sales will be constrained without a freer flow of credit into the mortgage market," Mr. Yun said. "The faster that happens, the sooner we'll see a broad stabilization in home prices that in turn will help the economy recover."
Aside from tighter loan standards and prices falling under the weight of bloated inventories, a weakening job market hasn't helped the housing market. The key non-farm payrolls number in the government monthly report on employment has gone down eight times in a row.
The August resales level of 4.91 million reported Wednesday by NAR was below Wall Street expectations of a 4.95 million sales rate for previously owned homes.
The average 30-year mortgage rate was 6.48% in August, up from 6.43% in July, according to Freddie Mac.
Regionally, sales of existing homes declined 6.6% in the Northeast and 5.3% in the West. Sales rose 0.9% in the Midwest and 0.5% in the South.