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Tuesday, March 23, 2010

Bad month for home sales

As expected.

There are far more houses for sale then there are qualified buyers. Some combination of chicanery and stupidity on the part of mortgage brokers/banks/FHA managed to temporarily 'juice' the pool of 'qualified buyers', largely by using the same tactics that credit card companies have: Give everyone credit and charge a savage interest rate.

For credit card companies, it was a great strategy, especially thanks to recent changes in bankruptcy law (2k8?) mandating that credit card debt was not erased by bankruptcy. For mortgage companies, that has worked less well: Home-owners have increasingly decided to walk away from their huge debts.

To use an analogy, the Federal house credit solidified house prices today, by shot-gunning almost ready home buyers into todays housing pool. However, it's a case of diminishing marginal returns. Everyone who can reasonably afford* to buy a house has bought one.

In combination with the next surge of defaults, expect things to get nasty.

*Stable employment, good credit, cash savings for down payment, unlikely to move...