Greg Fielding in The New York Times

A little publicity never huts, right?

Earlier this week, I got a call from Joe Nocera at The New York Times to talk about the the housing market and, specifically, July’s collapse in existing home sales. He was intrigued by a post of mine: Home Sales Plummet – Which Was The Statistical Blip?

The most important number, the number that drives prices, is the Months-of-Supply. Which is the statistical blip in this graph?

While it makes perfect sense that the expiration of the homebuyer tax credits played a huge role in July’s sales collapse, Joe and I talked about how there are other factors at play. Tax credits are a convenient scapegoat, but there is an undercurrent of negative economic data and changing social attitudes towards real estate that is beginning to have an impact.

From The New York Times Widespread Fear Freezes Housing Market

You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.

On Tuesday, the self-proclaimed “voice for real estate” released its “existing home sales” figures for July. They were gruesome. Sales were down 27 percent from the previous month, and down 26 percent from a year ago. Annualized, the July sales figures would translate into fewer than 3.9 million homes sold this year — a staggeringly low figure. (The record high occurred in 2005, when more than seven million houses were sold.)

The months-to-sale number was depressingly high; the Realtors group reported that it now takes more than a year to sell a typical house, compared with six months in a normal market. The amount of inventory is high.

…

Why is this happening? Just as the subprime bubble of 2006 and 2007 required one kind of perfect storm — namely, incentives to throw underwriting standards out the window — we are now living through the opposite kind of perfect storm. Essentially, every participant in the housing market has a reason to be afraid. And that fear is paralyzing.

…

The prospective buyer, for instance, has two good rationales to fear buying a new home. One is the unemployment rate. “A major psychological thing happens with high unemployment,” says Dave Zitting, a veteran mortgage banker and founder of Primary Residential Mortgages. “Those with a job worry about whether they are going to keep that job” — which, in turn, prevents them from taking the plunge on a new home.

The second reason is that, Mr. Yun notwithstanding, most people simply do not believe that housing prices are even close to hitting bottom. “In the Bay Area, a house that was worth $300,000 a decade ago became a million-dollar home,” said Greg Fielding, a real estate broker and blogger. “Now it is listed at $800,000.” That price, he suggested, was still unrealistically high. The seller, meanwhile, doesn’t want to face the fact that his or her home is too richly priced, and won’t sell at a more realistic price — which may well be below his or her mortgage debt.

There is also an immense amount of inventory that has yet to hit the market but will, sooner or later. People in the real estate business have taken to calling this “the shadow inventory.” It consists of homes for which the owners have stopped paying the mortgage but the banks haven’t foreclosed on yet, foreclosed properties that have not yet been put up for sale, homes with modified mortgages that the owners still can’t afford and will soon default on and so on.

…

The tax credit for home buyers; the willingness to look the other way as banks refused to foreclose, pretending that the owners still planned to pay their mortgage; the half-baked government mortgage modification programs — they were all aimed at buying time until the economy recovered and employment picked up. At which point, they hoped, the housing market would have achieved enough lift that it could take off on its own.

At the end of June, though, the tax credit disappeared — and that’s when time ran out. On Friday, the new G.D.P. numbers came out, confirming what everybody already knew. The economy has not recovered — not even close. If the housing market is like an airplane on a runway, it is far more likely to crash at this point than it is to take off. That is why the July numbers are so scary to those in the housing business.

On the ground, they don’t look like a blip. They look like a very painful future.

Should be an interesting rest of 2010 indeed.