Buying activity in the residential real estate market slowed dramatically in July, according to a report released Tuesday by the National Association of Realtors. The dramatic plunge is yet another sign  the U.S. economy may be heading toward a slowdown or double-dip recession.

The realtor industry group said existing home sales plummeted 27.2% in July to an annualized pace of 3.83 million units from a downwardly-revised 5.26 million units in June.

With this drop, existing home sales are now down 25.5% from July 2009 and have hit the lowest level since May of 1995.

NAR attributed the big drop in sales to the expiration of the first-time home buyers tax credit earlier this year.

“Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired,” said Lawrence Yun, chief economist with NAR in a statement.  “Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September.”

The considerable drop in home buying comes despite record-low mortgage rates and an easing in credit markets. Freddie Mac said the average 30-year fixed-rate mortgage fell to a record low of 4.56% in July.

Inventory levels, which rose to a 12.5-months’ supply compared with a 8.9-month supply in July, continues to worry investors. 

“From our vantage point, the first time home buyers credit pulled forward demand – by definition this is what stimulus measures achieve,” said Dan Greenhaus, chief economic strategist with Miller Tabak in an e-mail. “However the issue this time is that there was so little demand to be pulled forward, the credit has left no demand for the summer.  The result is exactly what we’re seeing; a near, if not outright, collapse in housing. 

All regions of the nation saw double-digit declines in home-buying activity. Sales in the Northeast dropped by 29.5% and remain down 30.3% from a year ago. Midwest sales fell 35% and remain down 33.3% from 2009 while sales in the South dropped 22.6% and are down 19.8% drop a year ago. Sales in the West fell 25% and are down 23% from a year ago.