The September Existing Home Sales number came out yesterday, and it is off by roughly 20 percent from a year ago (it is a little less than that when seasonably adjusted, a little more when not seasonally adjusted). At the same time, inventories and the month's-supply measures continue to rise.
There is also a chance things will get worse. I was at a Homer Hoyt conference that I helped organize on subprime yesterday. Two participants, Dave Crowe and Marsha Courchane, made the point that of the subprime loans that have gone into default, 91 percent did so without a rate reset.
Mark Zandi and Steve Westley both presented data that showing subprime originations from the first quarter of '07 were performing even worse than the '06 book, although that could be because of changing housing market conditions, rather than deteriorating credit quality per se. In any event, it is possible we will see a lot more inventory dumped on the market through the REO process, which will further depress demand.
My colleague Vanessa Perry (as well as others) have an intriguing idea--simply let everyone with an ARM about to reset refinance into a reasonably priced (what this means is not clear) fixed rate mortgage. Among other things, this might separate out those who really want to stay homeowners from speculators (who will want to dump houses they were planning to flip anyway). But no matter what, it is hard to see where a housing recovery is going to happen over the next three years.
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