NEW YORK (CNNMoney) -- Sales of existing homes fell unexpectedly in July, as strict lending and low appraisals prevented consumers from scooping up some of the cheapest houses since 1970.
Sales of previously owned homes tumbled 3.5% last month to an annual rate of 4.67 million, down from 4.84 million in June, according to the National Association of Realtors.
Economists had expected July sales to come in at a much higher rate of 4.87 million homes, according to consensus estimates from Briefing.com.
From the same month a year ago, sales are up 21%. Meanwhile, the national median home price in July was $174,000 -- down 4.4% from a year earlier.
While the struggling housing market has made buying a home increasingly affordable for consumers, many can't get financing from lenders to make purchases and therefore help the market recover, said NAR chief economist Lawrence Yun.
"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers, ignoring a large share of otherwise creditworthy buyers," Yun said.
"Those potential buyers represent the difference between an uneven recovery and a much more robust housing market that could stimulate additional economic activity and create jobs," he added.
Contract failures, largely caused by declined mortgage applications or appraisals below the negotiated price, were unchanged in the month. But 9% of realtors said that a contract was delayed in the past three months because of low appraisals, while another 13% reported that contracts were negotiated to a lower sales price because an appraisal came in below the price that had initially been agreed upon.
There were 3.65 million existing homes on the market at the end of July, according to the report. At the current sales rate, it would take 9.4 months to sell through that inventory -- up from 9.2 months in June.
Home sales rose in the Northeast and Midwest, but the gains were offset by declines in the West and South. Distressed homes, which include foreclosures, accounted for 29% of sales in July.
Plans for new home construction also came in weaker than expected in July. After showing some strength just a month before, new home construction slumped in July, the Commerce Department said earlier this week.
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