Existing home sales dip to 7.16 million

Sales in June were revised up to a record 7.35 million from 7.33 million reported earlier.

July sales were up 4.7% from July 2004.

"This is a big number any way you slice it," said David Lereah, chief economist for the real estate group.

Economists were expecting sales of about 7.29 million, according to a survey conducted by MarketWatch. See Economic Calendar.

Median sales prices rose 14.1% year-over-year to $218,000, the industry group said. A 14% price appreciation in a year "is not sustainable," Lereah said. Read the full report.

Inventories of homes for sale rose 2.6% in July to 2.751 million, a 4.6-month supply at the current sales pace. It's the largest inventory since May 1988, and the largest months' supply since November 2003.

"We are starting to see some air coming out of these balloons," Lereah said. "Inventories are starting to build," he said, which could put supply in better balance with demand, thus reducing pressure on prices.

Inventories "are still quite lean by historic standards," said Al Mansell, president of the realtors group and a real estate agent in Salt Lake City.

Economic fundamentals, including interest rates and job growth, continue to support the housing market, Lereah said.

Sales were flat in the South, and fell 7.5% in the West, fell 3.3% in the Northeast and fell 1.8% in the Midwest.

"We see a rolling boom moving from one metro area to another over time, as well as a spillover effect into nearby areas with lower home prices," Lereah said. "This is spreading the wealth of housing returns."

Sales of single-family homes fell 2.3% in July to a seasonally adjusted annual rate of 6.24 million. Sales of condos dropped 5% to a seasonal rate of 915,000.