Home Sales Still Sink

On the heels of today's bad news about home prices, the National Association of Realtors (NAR) poured a little gas on the fire. Today, it reported a 12.8% year-over-year drop in home sales.

Forget that misleading, 4.3% month-to-month drop that the NAR would prefer glazed-eyed news organizations to report. It's the yearlies that matter, and this truly awful performance will, I believe, lead the NAR to make yet another adjustment to next month's home sales forecast.

Oh, and we can also forget the NAR's headline. "Home Sales Drop on Temporary Mortgage Problems" is absolute bunk. There's nothing at all "temporary" about the situation in mortgages. Lenders like Impac Mortgage Holdings (NYSE: IMH  ) and NovaStar Financial (NYSE: NFI  ) are dead in the water, along with dozens of others. Survivors like Countrywide Financial (NYSE: CFC  ) are reduced to wandering about, hat in hand, looking for bailouts from old friends like Bank of America (NYSE: BAC  ) .

That's because all those defaults dried up the supply of money to fund gimmicky new mortgages, and that's what was powering the housing bubble. Not solid economic growth. Not increases in population. Not good jobs. It was greed and bad lending, greased by fancy financial derivatives that hid the risk from naive buyers -- until that risk showed up. Now that the easy money is gone, and banks like Washington Mutual (NYSE: WM  ) have buttoned up their low-end lending, with mortgage packagers like Bear Stearns (NYSE: BSC  ) losing that gravy train, there's nothing left to bounce housing back to its prior levels.

It may look rough down there, but that's only because we're coming out of la-la land. Where we're headed is back to normal, where a house is not an investment, it's just a place to live. That's really not that scary for most people. For those who did unwise things with their money, the story will be different.

For related Foolishness:


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 537389, ~/Articles/ArticleHandler.aspx, 12/18/2014 9:31:32 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement