(Existing-home sales article updated with additional data and commentary.)

NEW YORK ( TheStreet) -- The National Association of Realtors said Tuesday morning that existing home sales fell 27.2% in July to a seasonally adjusted annual rate of 3.83 million units. Economists had expected the figure to come in at 4.72 million units, compared with a downwardly revised 5.26 million in June.

Sales were at the lowest level since the total existing-home sales series launched in 1999, the report said. Single-family homes were at the lowest level since May of 1995, plummeting 27.1% in July to a seasonally-adjusted annual rate of 3.37 million, from a pace of 4.62 million in June, and 25.6% below year-earlier levels. Single-family homes account for the bulk of all existing home sales.

"The numbers are worse than I thought they would be," ConvergEx Group chief market strategist Nicholas Colas told TheStreet. "The threat of a double dip seems to grow with every economic data point."

The Dow Jones industrial average was down by more than 100 points on the data. "Fears of another leg down in real estate are certainly weighing on hopes for broad based economic recovery," Colas noted. **

The SPDR S&P Homebuilders ( XHB), an exchange-traded fund that tracks the homebuilder sector, dropped sharply after the housing data was released but was 0.1% higher in late-afternoon trading. Shares of Lennar ( LEN), among the XHB's top holdings, jumped 2.4%, while fellow builders KB Home ( KBH) and Ryland ( RYL) gained nearly 3%.

>>Existing-Home Sales: Winners and Losers

Toll Brothers is due to report its quarterly earnings Wednesday. The builder is expected to book a loss of $24.3 million, or 14 cents loss per share, on revenue of $396.6 million.

NAR chief economist Lawrence Yun said soft home sales will likely continue for several more months.

"Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September," he said. "However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

"Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year," Yun continued. "To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years."

Median existing-home prices for all housing types was $182,600 in July, up 0.7% from a year ago. Distressed homes accounted for 32% of all transactions in July, flat from June, the NAR reported.

The U.S. needs another round of homebuyer tax credits to help stimulate the housing market and the economy, according to readers of TheStreet.

>> We Need Another Homebuyer Tax Credit, Poll Says

The housing market has been under tremendous pressure for some time, and demand fell further after the springtime expiration of federal tax credits for homebuyers. Most analysts agree the situation is likely to get worse before it gets better.

Yun was not quite as pessimistic.

"Thanks to the home buyer tax credit, home values have been stable for the past 18 months despite heavy job losses," he said. "Over the short term, high supply in relation to demand clearly favors buyers. However, given that home values are back in line relative to income, and from very low new-home construction, there is not likely to be any measurable change in home prices going forward."

We asked our readers if another round of homebuyer tax credits would help or hurt the economy. TheStreet overwhelmingly agreed that yes, another homebuyer tax credit would benefit the housing market and the entire economy. Out of 207 votes, 62.3% respondents voted yes while 37.7% vote no, viewing another tax credit as simply barking up the wrong tree.

>>4 Top Homebuilder Stocks: Life After the Tax Credit

The inventory of existing homes on the market at the end of July increased by 2.5% to 3.98 million. At the current sales pace it would take 12.5 months to work through that inventory, up from an 8.9-month supply in June.

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July showed a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

-- Written by Miriam Marcus Reimer in New York.

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