Southern California home sales collapse by 21 percent year over year. Real estate tanks simultaneously with ending of government artificial market int

As would be expected, home sales in Southern California have collapsed in near synchronization with the ending of tax credits and tighter lending guidelines. The July sales figures fell on a year over year basis by 21.4 percent. This is a significant drop in a summer month that usually has solid home sales. This is the proof that the market is merely being held up by massive government intervention and incredibly expensive tax credits that serve really no purpose except to provide a short term sugar high for the market. The size of the decline resembles the declines we saw during the inflection point of the bubble bursting. As you will see in the next chart, home sales always collapse first and then prices follow. This is how the market reacts to imbalances and many cities in Southern California are still largely in housing bubbles. The market is essentially saying that home prices are too expensive without government subsidies. It is also the case that the job market is incredibly weak even after all the bailouts and stimulus that have been injected. Let us examine the Southern California sales pattern first. (more)