According to the National Association of Realtors, purchases declined 0.2 percent, less than forecast, to an annual rate of 5.75 million, from 5.76 million in June. This was the slowest pace since November 2002. Sales dropped 9 percent compared with a year earlier.
Economists predict that with no recovery in sight for residential real estate, lower property values and harder-to-get mortgages threaten to weaken consumer spending. The Federal Reserve this month acknowledged a growing risk to economic growth in the wake of subprime mortgage defaults and a plunge in stock prices.
"We still have an overhang of inventory that needs to be reduced,'' Robert Stein, senior economist at First Trust Advisors in Lisle, Illinois, said before the report. "The housing recession will continue into the middle of next year. Then we may see a glimmer of hope.''
Resales were forecast to fall 0.9 percent to a 5.7 million annual rate, according to the median forecast of 74 economists in a Bloomberg News survey. Estimates ranged from 5.5 million to 6 million. Existing home sales averaged 6.51 million in 2006.
In terms of new home sales, on August 24, the Commerce Department reported that new home sales unexpectedly rose in July for the second time this year, to an annual pace of 870,000, Purchases may show renewed weakness as turmoil in credit markets pushes some mortgage lenders out of business and prompts others to restrict lending, economists said.