Home buyers continued to show less interest in existing homes last month, casting new doubt over the market's ability to sell its glut of houses.

The annual rate of existing home sales fell 27.2% in July to 3.83 million units a year, the National Association of Realtors reported Tuesday. Economists polled by Briefing.com had projected a less steep decline to a rate of 4.6 million.

The data mark the third consecutive monthly decline in the annual sales rate, which is now slower that it was a year ago, when it stood at 5.14 million units.

The report shows the housing industry has hit more turbulence, is not leveling off and is worried about a nose dive, says Mitchell Hochberg, principal at Madden Real Estate Ventures in New York. Unemployment, foreclosures and shadow inventory are keeping consumers on the sidelines waiting for prices to drop further.

Many analysts say the long bout of weak housing data could continue until the unemployment rate improves and consumer confidence rises.

The rate of existing home sales is influenced by a combination of demand and mortgage rates. Historically, demand existing homes has risen following a recession when many potential home buyers sit on the sidelines. However, sales growth has stalled since the second quarter of this year.

The expiration of the homebuyer tax credit and the subsequent decline in home purchases suggest the housing market may not be able to stand on its own without government intervention. When the tax credit expired on April 30, home buying activity slowed 30%+ and hasn't rebounded much while the number of homes for sale has risen, John Burns, chief executive of John Burns Real Estate Consulting, wrote in a report.

Meanwhile, demand for homes remains low.

There is no pent-up demand, David Rosenberg, chief economist and strategist at Gluskin Sheff, wrote in a report. At the margin, housing is simply no longer viewed as a viable investment.

The lack of demand is glaring, given current mortgage rates, which sit at historic lows. Rosenberg says that weakness has presented in a 38% decline in new applications over the last year and the third lowest level on record for customer traffic in showrooms.

The NAR report also showed a 2.5% increase in the total housing inventory to 3.98 million existing homes, which represents a 12.5-month supply, up from around nine months in June.

Prices for existing single-family homes in 11 out of 19 metropolitan areas were higher in July than they were during the year-ago period, but sales have fallen in all areas compared to a year ago. The data suggest a buyer s market, but a dismal outlook for the broader economy.

Falling home prices hurt almost everyone, especially Fannie Mae and Freddie Mac and the taxpayers that are now backing them, Burns wrote.