Housing throws in the towel

http://news.yahoo.com/s/ap/20070711/ap_on_bi_ge/home_prices;_ylt=AttBDReqQnTq4Nz0_nxhqQNu24cA

Just a few months ago, the Real Estate spin-meisters were beating the drum of a housing bottom. The NAR even claimed a 1%+ price increase. A lot of people were hoping for a Spring re-bound.

But the homebuilders were not cooperating with this fantasy. Every quarter the homebuilders have presented evidence of an accelerating erosion. DR Horton just announced that cancellations increased from 32% to 38%. Ouch. And this is prime buying season.

So now they are throwing in the towel on this year and looking to next year. The drums are beginning to beat. Next year will be the bottom, they say. And the Fed has to drop rates to support the housing industry.

This, of course, is wishful thinking.
Higher costs of borrowing - Lenders are going to get more demanding with the collapse of the subprime market and a writeoff conservatively estimated at $52B (and more likely approaching $100B in 1 year). And, of course, there will be fewer lenders
Fewer Buyers - Naturally, stricter lending standards will reduce the pool of buyers. And with foreclosures accelerating, many buyers will be unable to buy due to that pesky bankruptcy note on their credit reports. And investors and speculators are gone - and they were about 30% of the buyers. That's my figure based on fundamental reality that home sales are down that much and more - and I believe that the bulk of the gap is because speculators/investors stopped enteringthe market and flipping. Whatever the case, fewer people want to buy the inventory out there
More sellers - Bankruptcy will create more sellers, investors will dump houses, and so on.
Prices are dropping, not rising - There may be a false bounce, but the ARM re-setting will kill it. As reality sets in, people will not buy.