Sales of previously owned U.S. homes dropped more steeply than expected in July to their lowest pace in 15 years, an industry group said Tuesday, implying further loss of momentum in the economic recovery. The National Association of Realtors said sales dropped a record 27.2 percent from June to an annual rate of 3.83 million units, the lowest level since May 1995. June's sales pace was revised down to a 5.26 million-unit pace. Analysts polled by Reuters expected existing home sales to tumble 12 percent to a 4.70 million-unit pace from the previously reported 5.37 million units in June.

One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven't bottomed out.

"It really is a self-fulfilling prophecy," said Aaron Zapata, a real estate agent in Brea, Calif. "If all buyers perceive that home prices are coming down, then they will stop making offers -- and home prices will come down." The housing market is also being hampered by the weakening economic recovery. Unemployment remains stuck at 9.5 percent and many potential buyers worry they might not have a job to pay the mortgage.

Prices have fallen in part because foreclosures are running about 10 times higher than before the housing bust. Though the average rate for a 30-year fixed mortgage has sunk to 4.42 percent, many people can't qualify because banks have tightened their lending standards.

Home sales picked up in the spring when the government was offering tax credits. But the tax credits expired on April 30 and the market has been hobbled since. The drop in July's sales was led by 35 percent plunge in the Midwest. Sales were down 30 percent in the Northeast, 25 percent in the West and 23 percent in the South. The median sale price was $182,600, up 0.7 percent from a year ago, but down 0.2 percent from June.

"You could argue we don't need a single home built in this country because we have tons of vacant homes," said Jody Kahn, of John Burns Real Estate Consulting, which is based in Irvine, California and advises homebuilders. "We don't have enough demand right now to be sustaining a dozen public builders."