Sales of single-family homes, including co-ops, condominiums and townhouses, fell 3.5 percent to a seasonally adjusted annual rate of 4.67 million homes. Sales, however, were 21 percent higher than the 3.86 million unit pace of July one year earlier.
"Affordability conditions this year have been the most favorable on record dating back to 1970, but many buyers are being held back because banks are offering financing to only the most highly qualified borrowers," NAR Chief Economist Lawrence Yun said in a statement.
Lenders are "ignoring a large share of otherwise creditworthy buyers," he said.
The national median price for existing homes was $174,000 compared with $184,300 in June -- a drop of 4.4 percent.
NAR said the housing inventory at the end of the month fell 1.7 percent to 3.65 million homes, a 9.4-month supply at the current pace of sales, up from a 9.2-month inventory in June.