“In the financial markets, a lack of liquidity immediately leads to falling prices,” said Lou Barnes, the founder of Boulder West Financial Services. (Boulder West was acquired last year by Premier Mortgage Group.) “In the real estate market, something different happens,” he added. “Illiquid real estate markets freeze.” That is what is happening now. For months, the Obama tax credit had been the only grease in the housing market. Now that it is gone, the buying and selling of houses is essentially grinding to a halt.

You have to wonder sometimes what they’re smoking over there at the National Association of Realtors. On Tuesday, the self-proclaimed “voice for real estate” released its “existing home sales” figures for July. They were gruesome. Sales were down 27 percent from the previous month, and down 26 percent from a year ago. Annualized, the July sales figures would translate into fewer than 3.9 million homes sold this year — a staggeringly low figure. (The record high occurred in 2005, when more than seven million houses were sold.) The months-to-sale number was depressingly high; the Realtors group reported that it now takes more than a year to sell a typical house, compared with six months in a normal market. The amount of inventory is high. Lest we forget, these awful numbers are coming out at a time when the financial incentive to buy could hardly be stronger: the fixed rate on a 30-year mortgage is at an incredibly low 4.36 percent, according to an authoritative survey conducted by Freddie Mac.
By Joe Nocera, August 27, 2010 NYT

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08/28/10 NYT