This really shouldn't be a monster surprise - it's been discussed at length how the tax credit pulled demand forward, how crappy the economy really is, and how home values are still too high.
"Aug. 24 (Bloomberg) -- Sales of U.S. previously owned homes slumped more than forecast in July and the number of unsold houses swelled, evidence the market is depressed by foreclosures and limited job growth.
Purchases of existing homes plunged 27.2 percent to a 3.83 million annual rate, figures from the National Association of Realtors showed today in Washington. The pace compares with the median forecast of a 4.65 million rate, according to a Bloomberg News survey.
A tax credit of up to $8,000 boosted sales earlier in the year, pulling forward demand and indicating additional advances will prove difficult. Mortgage rates at record lows have provided scant relief to the industry as unemployment hovers close to 10 percent, foreclosures hold near record-highs and the economy cools.
“To have a full recovery in the housing sector we need a full recovery in the job market,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “The low mortgage rates normally would help quite a lot but we really need to see the job growth pick up for housing to improve.”
The pace of existing home sales is the slowest since comparable records began in 1999.
Economists projected sales would fall from June’s previously reported 5.37 million pace. Estimates in the Bloomberg survey of 74 economists ranged from 3.96 million to 5.3 million. Previously owned homes make up about 90 percent of the market. "
Now remember - I do not have a PhD in Economics, yet apparently the 74 economists surveyed by Bloomberg didn't gain some sort of magic insight from their PhDs in Economics either - as every single one of them was too high with his estimate (with the MEDIAN estimate being off by over 21%! Of course, that means that half of the economists had a more than 21% error in their estimate).