Markets were shaken and many economists were shocked by yesterday’s awful report on existing home sales in July, which nationwide dropped a record 26% from a year earlier thanks to the still weak economy and the expiration of the homebuyer tax credit.

The Rhode Island Association of Realtors won’t report what happened locally until Monday, but the Projo took a crack at figuring out what we’re going to hear:

Although RIAR spokesman Kerry Park said July sales in the state were down, it is unclear whether Rhode Island’s July decline will match the national statistics. …

“The flurry of activity ended on April 30; there is no question about that,” said Sally Lapides, CEO of Residential Properties Ltd. April 30 was the deadline for signing purchase-and-sales agreements for the tax credit; sales then had to close by June 30.

A 15% drop in July home sales, compared with July 2009, was seen in the eight Rhode Island offices operated by Coldwell Banker Residential Brokerage, according to Mary Leahey, regional vice president.

If anything, I’d expect homes sale dropped even more in Rhode Island than they did nationally and in Massachusetts (where sales fell 28% last month).

Unemployment is significantly higher here, which means fewer people have the means (or the credit history) to get a mortgage. And the number of pending sales, which The Journal didn’t mention, has been dropping since March, down 29% in June from a year earlier, according to the Realtors. (Pending sales are those for which a contract has been signed but the sale hasn’t closed.)

All that makes me wonder whether we could find out single-family home sales dropped by 30% or more here last month. And that’s bad news for the economy, for the reasons I laid out in an article last month warning of a double-dip in Rhode Island’s housing market. The Washington Post’s Frank Aherns gave the same warning yesterday, but he also said a further drop may be necessary (he compares it to an enema – yuck):

Painful as it is to take in the short term, today’s news about the plunge in home sales is exactly what this economy needs for the long run. …

You’ve probably already seen the value of your home drop 20, 30, 40 percent over the past four years. That’s painful, especially because it’s the largest purchase most Americans will make in their lives. But today’s number – combined with the general economic malaise – tells us that home prices probably still have not hit bottom.

And that’s exactly what needs to happen before the economy can right itself.