Why nobody wants to buy a house

With government bribe money gone, so is any sane demand

By MarketWatch

CHICAGO (MarketWatch) -- Nobody wants to buy a house. Nobody in their right mind, anyway.

Oh, sure, a lot of gullible first-time buyers got lured into the market over the last 18 months to take advantage of an $8,000 federal tax credit (not realizing how little difference that money will make when the first property-tax bill hits at the same time the roof springs a pesky leak and the city hits you with a special assessment for sidewalk repair). But that tax credit has expired -- and, with it, any semblance of demand for homes.

The July data on existing-home sales show just how much the tax credit skewed the housing market in the months it was in effect. Sales plunged 27.2%, the biggest one-month drop on record, and inventories of unsold homes jumped to 4 million, a 12.5-month supply at the current sales pace, the worst level that measure has seen in at least 11 years. Read more on the plunge in existing-home sales.

Because of the original timing of the tax credit -- you had to sign a contract on a house by April 30 and close by June 30 (the closing deadline was later extended to Sept. 30) -- it was obvious that sales would get an artificial boost in June as buyers rushed to beat the deadline (since existing-home sales are reported once they close, not at the contract signing). And, by extension, there would be a big drop in July.

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