Resales have gained for four consecutive straight months, the longest streak of increases since 2004. "Momentum is building," said Lawrence Yun, NAR's chief economist. Economists surveyed by MarketWatch had expected sales to rise to an annual rate of 5 million, from a June reading of 4.89 million. Regionally, July's resales rose 13.4% in the Northeast, 10.9% in the Midwest, and 7.1% in the South. Resales were down 1.7% in the West. "The bottom line: this is a very strong report and speaks to the recent improvement in the U.S. housing market," wrote Ian Pollick, economics strategist with TD Securities, in a research note. The inventory of unsold homes remained high, rising 7.3% to 4.09 million in July. There was a 9.4-month supply at the July sales pace, matching the prior month's result. The high inventory could hold back a housing recovery, wrote analysts at RDQ Economics in a research note. "The supply of homes for sale remains elevated and this is likely to continue to put downward pressure on home prices in the near-term and dampen any housing recovery (a dynamic that will probably be exacerbated by the continued weakness in the labor market)," according to RDQ. Without seasonal adjustment, the median sales price fell 15.1% in the past year to $178,400. Distressed properties accounted for 31% of sales in July. Realtors and economists agree that tax incentives have brought a lot of first-time buyers to the market. While affordability is high, it's clear that some owners are distressed. On Thursday, the Mortgage Bankers Association reported that the percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, a record high percentage. Earlier this month, NAR reported that pending sales of existing homes rose in June for the fifth straight month, the longest streak of gains since 2003, as buyers were encouraged by low interest rates and bargain home prices

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