Low mortgage rates, prices fail to stop home sales from sinking to 15-year low

By Alan Zibel,J.W. Elphinstone, The Associated Press

WASHINGTON - Home prices in many parts of the United States scream bargain, and mortgage rates haven't been this low for decades. So why are houses across the nation sitting on the market for so long?

Sales of previously occupied homes in the United States fell 27 per cent in July, the weakest showing in 15 years, the National Association of Realtors said Tuesday. It was the largest monthly drop in the four decades that records have been kept.

Potential buyers are hesitating because they think home prices still have further to fall. Potential sellers — those with the stomach to put their homes on the market at all, anyway — are reluctant to lower their prices.

"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers — and home prices will come down."

While the standoff plays out, home sales are plummeting. (more)