President Obama and a complicit Democratic Congress implemented housing stimulus in February 2009 to subsidize demand and solidify the reeling home market.  Trillions of dollars have been spent paying people to buy houses, modifying defaulted mortgages, issuing loans with loosened credit standards, directly subsidizing mortgage rates through the open-market purchase of GSE securities, and the indirect subsidization of rates by guaranteeing more than 90% of mortgages issued. 

Eighteen months later, the housing market is in more dire shape than before stimulus was enacted.  Trillions of dollars have been wasted to no productive end.  The Congressional distortion has manufactured the worst housing market fundamentals since the Bubble collapsed.  Misguided politicians have extended the economic downturn by propping up housing prices at unsustainable levels.

Demand Crashes on Failed Housing Stimulus

Today's NAR report represents a material moment in the history of the Housing Bubble and The Affordable Mortgage Depression.  Sales volume and inventory data illustrates the utter failure of housing stimulus and is an empirical recognition that the Government's distortive public policy response, designed to prop up prices, has accentuated the housing market's problems.

Pre-Stimulus, existing home sales were in excess of 4.5 million per year.  In July 2010 the sales pace collapsed to 3.83 million.  This figure is the slowest monthly transaction rate since before the Housing Bubble began.  Housing prices, propped up at extraordinary expense, will fall as a result of evaporated, subsidized demand.




NAR's data indicated that housing prices also fell month-to-month during July, although this tidbit did not make it into the organization's press release.

Months of Inventory Reach Post-Bubble High

In May this forum observed the likelihood that housing would establish a post-Bubble record for months supply of inventory during the Summer. 

Disastrous April Housing Report Portends of Record Inventory in 2010 - 5/24/2010

The article emphasized that the inventory numerator (units for sale) would rise as foreclosures hit the market, but observed that the shrinking denominator (pace of transactions) would determine how quickly record months of inventory would result.

"This new benchmark (record months of inventory) could arrive in the next few months depending on steepness of the sales collapse.  Summer buyers might delay the record until fall, but as banks are forced to rationalize foreclosures, and the general population comes to understand how dismal the housing market really is, a record backlog of units for sale will follow."

The crash in housing demand, caused by Stimulus Spending Bill subsidies, has produced record months supply of inventory.  In July there was 12.5 months worth of for-sale homes on hand relative to the previous post-Bubble high of 11.2 in April 2008.





"Housing prices do not respond well to high, rising or record inventory."