Blown Mortgage

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Hat tip Keith at HousingPanic for this symbolic photo.  Existing home sales are down 21.5% year over year and hit a 6 year low, the National Association of Realtors reported today. It is the lowest number reported for existing home sales since the NAR started tracking the number. Larry Yun, the court jester hired to put a happy face on gloomy numbers for the NAR blamed the credit crunch for the dismal housing sales:

“The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch,” Yun noted.

I’ve got a slightly different hypothesis, Lar; people that have zero liquid reserves and mediocre credit scores are finding it impossible to buy their dream McMansion with 100% financing on stated income and stated assets. That’s what’s killing the numbers. We went through the “creditworthy” people a long time ago.

Funny, how the definition of creditworthy is so subjective - someone who wants to buy a house they can actually afford on their true income while putting 20% down and having 700+ FICOs can buy a property no problem. The problem is, is that those people are SMART. They’re waiting until this mess unravels to a point where entering the market makes sense. That won’t happen until housing prices correct to a level where shrewd people who are waiting decide that now is the time to buy.

The creditworthy people today that Larry claims are being denied are the “creditworthy” folks just getting the memo that the market ain’t what it used to be for financing a scant 3 months ago; and are realizing they probably need a real job, a smaller house, cleaner credit and some savings worth mentioning before they take a hit off the American pipe dream.

A choice quote from Market Watch:

“This is still absolutely awful, confirming that the existing-homes market is now in freefall,” wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. “This is consistent with existing-home sales falling to just 5 million or so,” down 10% from the latest level and 30% from the peak.

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