As expected, the pace of existing-home sales dropped in June, sliding to a seasonally adjusted rate of 5.37 million homes, according to data released Thursday by the National Association of Realtors (NAR).

That represents a 5.1% drop compared to the previous month and reflects the ongoing sluggishness in the market now that the housing tax credit has expired.  However, it was not as steep a fall as many industry watchers expected, with a consensus prediction of a 5.1 million-unit pace, according to IHS Global Insight, a research firm in Lexington, Mass.

Still, the weakening existing-home sales numbers suggest a difficult summer. Many expect a dramatic decline in home sales activity in July due to the ongoing feeble economy and poor job numbers. “Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge,” said Lawrence Yun, chief economist for the NAR. “Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.”

That could take some time. "It may be fall before a gauge of true market demand unhindered by tax credit noise is available to us," said Carl Reichardt, a senior equity research analyst with Wells Fargo Securities in San Francisco.

With the credit gone, first-time home buyers also may be exiting the market. According to NAR data, first-time buyers accounted for 43% of home purchases last month, a decrease of three percentage points compared to May. In April, the last month for first-time buyers to sign a contract and receive the credit, this segment represented 49% of home purchases.

Foreclosures and short sales remain a factor in the existing-home market, with distressed sales representing 32% of sales last month, according to the NAR.

As sales slow, inventories are rising, with the number of existing homes inching up 2.5% in June to 3.99 million houses on the market, which translates into an 8.9-month supply of homes for sale. Prices, however, are holding—at least for now. Compared to last year, the median sales price for an existing home in June rose 1% to $183,700. 

In comparison, the median price for a new home in May (the most recent figures available) was $200,900, according to U.S. Census data.

Overall, home prices stabilized in May, at least based on data released Thursday by the Federal Housing Finance Agency. Its monthly home price index moved up just 0.5% in May compared to the previous month. Year-over-year, the FHFA index is down 1.2%.

Across the country, the Pacific region posted the best monthly and annual improvement, with a 1.8% month-over-month increase and a 3.8% yearly jump. (The Pacific covers Hawaii, Alaska, California, Washington, and Oregon).

The next strongest on a monthly basis was the Mountain region, which reported a 1.7% gain for the states of Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona, and New Mexico. Year-over-year, though, the home price index covering these states slipped 3.5%, which was the weakest performance among the nine regions.

East North Central followed close behind, with a 3.2% annual drop for home values in Michigan, Wisconsin, Illinois, Indiana, and Ohio.

This government index is based on repeat home sale transactions from all 50 states and the District of Columbia involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. As a result, it tends to be less volatile than the closely watched S&P Case-Shiller home price indices, which look at transactions occurring in 20 major metro housing markets.

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: Washington, DC.