For months, a big federal tax credit for first-time home buyers propped up the housing market. In July, it stopped, and the results were grim.

Sales of previously occupied homes in the St. Louis region fell 38 percent compared with July 2009.

Similar declines hit markets nationwide, setting off alarms that the housing market is far from stable, and heightening worries that the economic recovery is losing steam fast.

Across the country, July was the slowest month for home sales in 15 years, according to numbers released Tuesday by the National Association of Realtors. And although comparable records weren't available for the St. Louis area, the 38 percent drop in sales from July 2009 to July 2010 was among the steepest of big metro areas.

The news was ugly, but not unexpected.

Sales surged in the spring, particularly in mid-priced markets such as St. Louis, as people took advantage of the first-time buyer tax credit. The $8,000 credit for first-time home buyers expired April 30, but those buyers had until June 30 to close on their home purchases.

Many economists warned that the credit was essentially "borrowing" sales from the future — spurring people who were planning a purchase to simply make it sooner.

"All of the action earlier this year appears to have been driven by the tax credit," said Nigel Gault, an economist with IHS Global Insight.

Now, he said, we're seeing "payback."

The hope was that the economy would be strong enough by this summer to spark demand from a new round of buyers, but that hasn't happened. Hence, a 38 percent plunge. And there is not much hope things will get better quickly.

"It'll even out a little bit, but we're not expecting a V-type recovery," said Mark Stallman, chief executive of the St. Charles County Association of Realtors. "It'll take a little while to come back."

Still, there are a few glimmers of good news.

Median prices were up in some parts of the region, climbing 7 percent in St. Charles County and 14 percent in St. Louis County, as higher-priced homes made up a bigger chunk of sales.

And inventory has been relatively stable here, said Kevin Cottrell, co-founder of Kelsey Cottrell Realty in Ballwin. At the current pace, it would take about nine months to work through all the unsold homes in St. Louis County, compared with 12.5 months nationwide, a figure that spiked nearly three months in July.

When it comes to supply, our region is faring better than some because its foreclosure rate is relatively low compared with hot spots such as Florida and Arizona, and because some would-be sellers are staying on the sidelines, waiting for prices to improve.

But unless demand somehow grows, Cottrell said, that could be a long wait.

"People are still in denial. They figure they'll wait and try in the spring," he said. "If they were rational, they'd be thinking about the spring of 2015."

For Larry Smith, the wait to sell has already been more than a year. That is how long he has had a brick three-bedroom in downtown St. Charles on the market. It is an investment property he has owned for about 25 years, and he is in no hurry to lower his $139,900 asking price to sell it — which is good, because he has had just a few casual lookers.

"It's tough out there to be a seller right now," Smith said. "There's a lot of people out fishing behind the net, and that's the only thing you see moving."

That won't change, many experts say, until the economy does, until the job market gets better and more people have more confidence to buy a house. The trouble is that housing and the economy have become so closely intertwined that the weak market is still dragging down everything else.

"The housing market is undermining the already faltering wider economic recovery," said Paul Dales, U.S. economist with Capital Economics. "With the increasingly inevitable double dip in prices yet to come, things could yet get a lot worse."

 

County	Sales			Median price
	July ’09	July ’10	Change	July ’09	July ’10	Change
St. Louis County	1,349	851	-36.9%	$140,000	$160,000	14.3%
St. Charles	461	255	-44.7%	$168,700	$180,000	6.7%
Madison	290	186	-35.9%	$111,500	$127,250	14.1%
St. Louis city	355	185	-47.9%	$137,000	$85,000	-38.0%
St. Clair	246	172	-30.1%	$125,000	$153,700	23.0%
Jefferson	209	127	-39.2%	$144,000	$138,000	-4.2%
Franklin	65	56	-13.8%	$123,250	$142,250	15.4%
Warren	44	34	-22.7%	$140,500	$124,500	-11.4%
Monroe	29	28	-3.4%	$170,000	$178,450	5.0%
Lincoln	43	25	-41.9%	$127,000	$106,000	-16.5%
Clinton	28	15	-46.4%	$107,250	$85,000	-20.7%
Total	3,119	1,934	-38.0%

The Associated Press contributed to this report.