Sales of existing homes fell for the fourth straight month in June, but prices defied the gravitational pull not only in California, but the nation.

The National Association of Realtors reported that the sales of existing homes dropped 3.8 percent in June, the slowest pace in four and a half years. Down from an annual rate of 5.98 million units set in May 2007, the June rate pulled annually adjusted sales down to 5.75 million units.

It sounds worse when you compare year-over-year. Sales dropped 11.4 percent in June from June 2006.

In California, where one in nine U.S. residents lives, home sales decreased 24.7 percent in June compared with June 2006.

Yet, the median price of an existing home rose nationally by a meager 0.3 percent in June. Considering sales were slower in May, that's a 3.3 percent jump in price in one month and the first upswing over same-month prices in a year. And in California, the median price of an existing home rose 3.2 percent. That's in a market with a supply of about 10 months of inventory on hand. Six months on hand is considered well balanced for buyers and sellers.

That's why rising prices don't make sense when sales are slowing and inventories are building. With more to choose from, buyers tend to negotiate harder.

Nationally, the supply of unsold homes on hand in June dropped 4.2 percent to an 8.8-month supply. That's still high, but down from the 15-year high set In May.

Economists speculate that one reason that home prices haven't come down is because market fundamentals such as growing job bases are supporting home prices and that some sellers have pulled their homes from the market to wait for better offers. Others, such as the NAR's senior economist Lawrence Yun that "it appears that some buyers are looking for more signs of stability before they have enough confidence to make an offer."

This suggests a classic standoff, and which way it goes is anybody's guess, but here's what could happen.

Both buyers and sellers may begin to look at opportunity costs as well as their actual costs:

• Money's not going to get better. Currently, mortgage interest rates are lower than they were this time last year, but economists are bullish that rates will go up, due to higher competitive rates being offered by foreign banks such as China and England. That means that American banks will have to compete to attract foreign investment. If lending rates go up, mortgage rates will too.

• Selection's not going to get better. If that doesn't move buyers along, another reason might -- home sales are declining and anticipated to decline further, but sellers are proving to be both stubborn and resilient. Unless something induces a panic and more sellers pour into the market, absorption will pick up, inventories will come down, and buyers will find they are paying higher prices for inferior properties.

• Advantage isn't going to get better. Now's the time to trade up, while inventories are saturated. When absorption starts, the best properties are picked off first.

  Buyer competition's not going to get better. Now is the best opportunity for buyers to find and negotiate for a home while other buyers are still wondering what to do. When they decide to jump in and buy, the competition for homes will get worse.

Even so, the NAR forecasts that sales of existing homes will fall by 5.6 percent this year with prices dropping by 1.4 percent. That would mark the first annual price decline on record.

But only if buyers win the standoff.

Published: July 26, 2007

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.