One of my favourite writers at the Atlantic blogs, Daniel Indiviglio, contemplates the new National Association of Realtors numbers, which posted greater than expected housing sales, but still less than enough to see any substantive change in the market. Indiviglio wonders if the banking system is actually just gun shy to the idea of new loans, in large part due to the regulatory smackdown many banks got after the crisis started.


While banks should be more selective about handing out mortgages than they were a few years ago, their conservative underwriting may now be more clearly contributing to the weakness of the housing market. The NAR’s cancellations index appears to show that home sales would be significantly stronger in recent months if contracts had gone through as expected. NAR estimates that sales would rise by as much as 15% to 20% if lenders weren’t being so stingy. Have banks gone too far in their efforts to avoid bad loans and begun denying loans that would perform soundly?

The National Association of Realtors results link is here.

On the other hand, Pete Boockvar at The Big Picture blog wrote:

Bottom line, as seen, the decision to both buy and actually close a purchase of a home is much more than where financing rates are and evidence that as much as the government wants to continue to prop up this vital sector, the true supply/demand dynamic will ultimately prevail in creating stabilization.

I like this debate that is happening among financial analysts right now. I think the true answer is more a mix of both market confidence and complete scare tactics in regulatory oversight, rather than one or the other.