Washington - Sales of previously owned US homes took a record plunge in July to their slowest pace in 15 years as the wind went out of the housing sector's sails and underlined a struggling economy.
Tuesday's report from the National Association of Realtors was the latest data series that indicated economic activity continued to slacken into the third quarter.
The NAR said overall sales were at their lowest since it started the existing-home sales data series in 1999, with single-family home sales that account for most business at their lowest since 1995. Association chief economist Lawrence Yun characterized sales as the softest since 1995.
The dismal sales report came as Chicago Federal Reserve President Charles Evans warned the risk of a double-dip recession was higher than six months ago. He doubted that output will actually shrink but said recovery will be modest.
"It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery. With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse," said Paul Dales, a U.S. economist at Capital Economics in Toronto.
Existing home sales dropped a record 27.2% from June to an annual rate of 3.83 million units, the lowest since the series began in 1999, the NAR said in a statement. NAR officials said sales were the lowest since 1995.
June sales were revised down to a 5.26 million-unit pace from a previously reported 5.37 million.
Financial markets had expected sales to fall only 12% to a 4.70 million-unit rate last month.
The dismal report sent U.S. stocks falling more than 1% as investors dumped riskier assets in favor of safe haven government debt. Prices for US Treasuries rallied, with the yield on the two-year note tumbling to a record low.
The US dollar fell to a 15-year high against the yen.
Tax credit partially to blame
The housing market, which helped to push the economy into its worst recession since the Great Depression, has been mired in weakness following the end of a homebuyer tax credit in April. The incentive pulled forward sales and building activity, leaving a huge void that analysts said was also being exacerbated by a 9.5% unemployment rate.
The sour economy, especially the stubbornly high unemployment rate is hurting President Barack Obama's popularity and putting in jeopardy the Democratic party's control of Congress in November's mid-term elections.
Almost three-quarters of Americans are very concerned about unemployment and more people now disapprove of President Barack Obama than approve of him, according to the latest Reuters/Ipsos poll.
The government on Friday is expected to revise down growth in second-quarter gross domestic product to an annual pace of 1.4% from 2.4%, according to a Reuters survey.
The recovery which started in the second half of 2009 has largely been driven by government stimulus and manufacturing as businesses replenish depleted inventories.
Some analysts said the drop in existing home sales had been exaggerated by the end of the housing tax credit.
"We are seeing a bit of an overcorrection from the end of the tax credit. We will probably see another month or two of this before we start the upward trend, later in the Fall we will probably be back to a more stable level," said Eric Fox, vice president for statistical and economic modeling at Veros in Santa Ana, California.
"But at the same time, unemployment has remained stubbornly high and a lot of people are sitting on the side lines until they see that there is a sustained recovery before they pull the trigger and buy a home."
With home sales tumbling, the inventory of previously owned homes for sale rose 2.5% to 3.98 million units from June, representing a supply of 12.5 months -- the highest since at least 1999 and up from June's 8.9 months.
The jump in the supply of homes was almost double the six to seven months' supply considered that has been historically consistent with stable prices.
Last month foreclosed properties accounted for 22% of sales while short sales made up 10%. First-time buyers accounted for 38% of transactions, the lowest in 12 months.
The national median home price rose 0.7% from July last year to $182 600.