The local real estate market experienced a sharp monthly reversal, with its worst summer performance – in terms of units sold – since 2000, according to statistics released today by the Multiple Listing Service (MLS) of the Chattanooga Association of Realtors.

In July of this year, Southeast Tennessee and the Northwest Georgia area saw the sale of 446 residential units, a 30% decrease compared to sales during the previous month, and a drop of 22.8% from the same period of 2009. Earlier 2010 monthly statistics had shown positive developments within the market, indicating the early stages of an emergence from a troubling recession and a return to a path of normal growth.

Local Realtor Association President Randy Durham said that, while the downturn was not completely unexpected, he was disappointed in its magnitude. “It has been over a decade since our July sales have diminished to this level, and I think that it is a clear sign of several negative factors coming into play all at once.

“Our members understood that there would be step back because of the expiration of the homebuyer’s tax credit, but I think that there’s much more to it than that. The ongoing problems in the unemployment picture are hurting sales across a wide swath of the American economy, and there are obviously no easy answers. From the federal government to local governments across the country, the threat – or reality – of higher taxes is creating a cruel disincentive for prospective homebuyers to make the investment in a new home when there is the realistic view of higher property taxes as a hidden cost of home ownership.”

Lawrence Yun, chief economist of the National Association of Realtors, said lower home sales are (to be) expected in the short term. “There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market (improves). Over the short term, inventory will look high, relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values.”

Mr. Yun expects mortgage interest rates to remain historically low for the balance of the year, with very modest growth in employment. He said, “We really need to see stronger job creation to have a meaningful recovery in the housing markets."

Chattanooga Area MLS President Bobby Teems agreed. “Many businesses, both large and small, are standing pat on their cash reserves and are reluctant to hire new workers – or rehire those they felt forced to layoff in the past year, obviously fearing tax increases. Our area’s unemployment rate has edged back up to 9.0%, and that simple statistic points to the fact that a ‘jobless recovery’ is really no recovery at all. Even with favorable interest rates, only the very top tier of buyers are now able to obtain mortgage financing, and without some lending relief, home sales can not gain traction and move forward.”

According to the Wall Street Journal, Freddie Mac reports that the long-term mortgage rates remain on a decline.

Interest on 30-year fixed loans hit a new low of 4.49 percent, compared to 4.54 percent the previous week and 5.22 percent a year ago; the 15-year mortgage landed at 3.95 percent, down from 4 percent the week before and 4.63 percent a year ago.

For the month of July, the local median home price was $129,900. That represents a decrease of 1.3% from the same period one year earlier and a statistically negligible decrease of 0.1%from the median price reported the previous month.

Average days on market decreased to a low of 115 dropping below the four month mark for the first time this year.