The sale of existing U.S. homes sank 27.2% in July following expiration of the home buyer tax credit but home prices continued to gain, according to the National Association of Realtors.

The number of existing home sales fell to a seasonally adjusted annual rate of 3.83 million in July from 5.26 million the month before, the lowest drop ever.

Lawrence Yun, NAR chief economist, said a soft sales pace likely will continue for a few additional months. “Consumers rationally jumped into the market before the deadline for the home buyer tax credit expired. Since May, after the deadline, contract signings have been notably lower and a pause period for home sales is likely to last through September,” he said. “However, given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs.

Inventories of unsold homes rose 2.5% to 3.98 million, representing a 12.5-month supply, the highest level since in a decade NAR said.  And the supply of unsold single-family homes reached its highest rate since 1982.

“Even with sales pausing for a few months, annual sales are expected to reach 5 million in 2010 because of healthy activity in the first half of the year. To place in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years,” Yun said.

The data wasn’t all bad news, NAR reported that single-family median existing-home prices were higher in 11 out of 19 metropolitan statistical areas reported in July in comparison with July 2009 (the price in one of 20 tracked markets was not available). However, existing single-family home sales fell in all 20 areas from a year ago.

See a full copy of the report here.