From the Wall Street Journal:


The housing market has come out of its tailspin, lifted by falling home prices, low mortgage rates and an $8,000 federal tax credit offered to some first-time home buyers. But stability, to say nothing of strength, still looks a long way off.

The National Association of Realtors is expected to report Friday that sales of existing homes rose for the fourth consecutive month in July, up 2.2% from June, on a seasonally adjusted basis. Problem is, a lot of the action is in distressed properties.

A survey conducted in June of 1,500 real-estate agents sponsored by the trade publication Inside Mortgage Finance found that 36% of all sales involve “nondistressed” properties.

Of the nondistressed sales, only 31% were what the survey described as “unforced or optional.” The rest were sales by homeowners in some kind of financial or personal crisis.

“Think about that for a minute,” John Mauldin of Millennium Wave Advisors wrote this week. “Two-thirds of home sales are either foreclosures or banks taking a loss on the mortgage.” And only a third of the remaining one-third — roughly 10% of overall sales — comes from “something we could call a normal selling process.”

That first-timer credit has sparked sales, and the NAR expects a flurry of sales in the next few months, as the credit expires Nov. 30. At the low end, it is a “feeding frenzy,” says Jim Klinge of Klinge Realty in San Diego.

Meanwhile, the Mortgage Bankers Association said Thursday that the number of homeowners behind on their mortgage payments hit a new high during the second quarter, with more than one in eight homeowners delinquent or in the foreclosure process.

So it is likely that sales will stay mired on the low end of the housing barbell.

Last July, sales of existing homes hit a five-month high, leading the NAR to openly hope a sustained upturn was coming.

It wasn’t.

Today, home sales are roughly where they were last year. Given the state of the consumer and the rise in foreclosures, they may be at this point again next year.

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