Huge Drop in July Home Sales Shows Failure of Stimulus Programs Existing home sales plunged a record 27% in July, falling to the lowest level in 15 years. Inventories of unsold homes rose by an even greater 40% and were at their highest point in over a decade. A spokesman for real estate industry group NAR described the market's disastrous performance, which took place in every region of the country, as a "pause". Once again analysts missed the number by a mile, being far too optimistic. Predictions were for a drop of 14%, a pretty bad figure in and of itself, but little more than half the actual result. The severe drop was also well telegraphed by a 30% decrease in pending home sales in May. Pending home sales tend to turn into existing home sales around two months later. May pending home sales dropped because of the expiration of the federal government's home buying tax credit on April 30th. It is now quite obvious that all this credit accomplished was to motivate people who were already going to buy a new home to do so sooner rather than later and it didn't create any additional sales. Just another example of how the federal government is wasting tax payer money on ineffective stimulus programs. The most amazing thing about July's existing home sales is that they were worse than anything that took place during the bottom of the Great Recession when the U.S. economy was shrinking at more than a 6% annual rate. Even at the bleakest point, existing home sales were around the 4.5 million level. This July they fall to a 3.8 million annualized rate. Moreover the drop from June was severe in every region of the United States - down 23% in the South, down 25% in the West, down 30% in the Northeast and down 35% in the Midwest. At the same time, inventories of unsold homes rose from 8.9 months supply in June to 12.5 months in July. Year over year, July 2010 home sales were down 26% from July 2009. Despite the across the board collapse in demand, median home prices somehow defied the fundamental laws of economics and rose 0.7% to $182,600. There are three important messages from the July existing home sales numbers. First, the housing market has not yet hit bottom and it could be a long time before this takes place. Secondly, the numerous government programs to stimulate the housing market- and this includes driving mortgage rates to record lows - have failed to make things better. Third, if the housing market is in worse shape than at the bottom of the Great Recession, then we are either already in another recession or about to enter one.    Daryl Montgomery Organizer, New York Investing Meetup http://investing.meetup.com/21 This posting is editorial opinion. There is no intention to endorse the purchase or sale of any security.