A gigantic drop in pending home sales was reported Wednesday:
(Hat tip to Interest Rate Roundup.)
Note that this is an index of existing home sales contracts signed in July. The actual number of closed sales will be lower because buyers will have difficulty getting financing for these sales.
The 12.2% drop in pending sales means that months of existing home inventory will be going up at least 12.2%. That should take it from 9.6 months to 10.7 months.
Inventory will literally be off this chart.
Go to Bubble Markets Inventory Tracking to see the stats for individual metros. Phoenix metro area is over a year of inventory. Queen Creek, a far outer suburb, is 14 months. Las Vegas is closer to two years.
New home inventory is steady at 7.5 months. The seasonally adjusted annual rate of new home starts is 1.39 million. But there are only 834000 annualized sales.
The residential housing market is going to start clearing again, someday. That's going to require prices to come down quite a bit. The market price will be set by banks getting rid of REO and by people who have to move.
Somehow the market doesn't realize this. People are treating what happened as an isolated subprime issue that caused an irrational credit panic.
Many builders won't survive this. Most of them destroyed all the value they created during the bubble by buying their own overpriced stock and plowing more money into land.
Update: Mortgage Broker Survey Finds 33 Percent of Home Loans Failed to Close Last Month. So if pending existing home sales are down by 12.2% and 33% fail to close because of funding issues, we could see actual existing home sales down 42%!