Sales of U.S. previously owned homes slumped more than forecast in July and the number of unsold houses swelled, evidence the market is depressed by foreclosures and limited job growth. Purchases of existing homes plunged 27.2 percent to a 3.83 million annual rate, figures from the National Association of Realtors showed today in Washington. The pace compares with the median forecast of a 4.65 million rate, according to a Bloomberg News survey. A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools. “To have a full recovery in the housing sector we need a full recovery in the job market,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “The low mortgage rates normally would help quite a lot but we really need to see the job growth pick up for housing to improve.” Stocks extended losses after the report, with the Standard & Poor’s 500 Index declining 1.7 percent to 1,049.31 at 10:04 a.m. in New York. The 10-year Treasury note surged, pushing down the yield to 2.48 percent from 2.60 percent late yesterday. The pace of existing home sales is the slowest since comparable records began in 1999. Purchases of single-family homes were the lowest since May 1995. Range of Forecasts Economists projected sales would fall from June’s previously reported 5.37 million pace. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market. Compared with a year earlier, existing home sales fell 27 percent before adjusting for seasonal patterns. The median price increased 0.7 percent to $182,600 last month from July 2009. The number of previously owned homes on the market rose 2.5 percent to 3.98 million. At the current sales pace, it would take 12.5 months to sell those houses, the highest since at least 1999 and compared with 8.9 months in June. The months’ supply of single-family homes at 11.9 months was the highest since 1983, the NAR said. All Regions Down Sales last month fell in all four U.S. regions, today’s report showed. Foreclosures accounted for 22 percent of total purchases in July, while short sales made up another 10 percent, the NAR said. Purchases will be “soft for at least two more months as the housing market works through the effects of the end of the tax credit,” Lawrence Yun, the group’s chief economist, told reporters at a press conference. Foreclosures and short-sales are boosting the so-called shadow inventory, and competing with owners trying to sell properties. Home seizures increased almost 4 percent in July from the previous month, with 325,229 properties last month getting a notice of default, auction or bank repossession, RealtyTrac Inc. said Aug. 12. The timing of the tax incentive has caused some wide swings in the existing home sales data. After surging to a two-and-a- half year high of 6.49 million in November, the month of the credit’s initial expiration, purchases dropped for the next three months. Demand then recovered in March and April, which was the deadline for signing contracts, before slipping again the next two months. Tax Credit The June 30 deadline to close deals, which is when existing home sales are tabulated, was extended to the end of September to ensure prospective buyers had enough time to complete transactions. Even so, there was a rush to close ahead of the initial expiration date because the extension wasn’t passed by Congress until July. Housing’s inability to build on the temporary boost generated by government assistance is one reason the economy is having trouble strengthening. Residential real estate may keep struggling for the rest of this year, while into “2011 and beyond, it is difficult to determine,” Richard Dugas, chief executive officer at Pulte Group Inc., said in an Aug. 20 interview with Bloomberg Television. Pulte is the largest U.S. homebuilder by revenue. ‘Demand Is Low’ “Demand is low across the country,” Dugas said. “You have record-low interest rates and excellent pricing, but consumer confidence eased. We really need the economy to improve and job creation to take hold before people feel comfortable stepping into a home.” To help bring stability to the market, the Obama administration will offer $1 billion in zero-interest loans to help homeowners who’ve lost income avoid foreclosure as part of $3 billion in additional aid targeting economically distressed areas. The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to an Aug. 11 statement. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement. Mortgage rates have declined as well. The average rate on a 30-year fixed mortgage dropped to a record-low 4.42 percent in the week ended Aug. 19, according to Freddie Mac. Private payrolls rose a less-than-forecast 71,000 in July and were revised down for the previous month, the Labor Department reported Aug. 6. Economists surveyed by Bloomberg forecast unemployment will end the year at 9.5 percent, unchanged from the rate in June and July. To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net

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