Where have all the home buyers gone?

An unintended consequence of the homeowner tax credit: Everyone who wanted to buy a house, did.

The number of homes currently being sold (black line) is low, compared to the past six years, but more important is the year-to-year comparison (blue lines): they show how each month's home sales compares to the same month, one year before. The Obama homebuyer credits made 2009 better than 2008, but each time it expires, nobody buys. Red lines are a comparison to the 5-year high, in June 2005.

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for August showing a slight increase with the seasonally adjusted national index climbing 4.3% since July but remaining a whopping 20.1% below the level seen in August 2009.

On a non-seasonally adjusted basis, the national index increased 6.4% since July but remained 18.4% below the level seen in August 2009.

It's fairly clear from these results that one of the untended consequence of the government's intrusion into the housing market has been to shift home sales from the future into the period preceding the tax gimmick expiration leaving the future with less potential demand.

It's important to note that with the government's tax scam now complete and little chance for similar meddling for the foreseeable future, the weaker "organic" trends have likely taken over.

Meanwhile, the NARs chief economist Lawrence Yun suggests the "recovery" in housing will be slow adding that strong home sales will depend more on unemployment and confidence than low mortgage rates.

"Attractive affordability conditions from very low mortgage interest rates appear to be bringing buyers back to the market, ... However, the pace of a home sales recovery still depends more on job creation and an accompanying rise in consumer confidence."

While Yun is certainly correct in his assessment, the most important stimulative force for our beleaguered housing markets will be lower home prices as sellers (banks, financially strapped/short sale homedebtors, accidental landlords, etc.) capitulate to the weak trends.

The following chart shows the national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

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