TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Home sales declined precipitously in July:

Economists and forecasters were predicting an awful 13% decline in existing home sales for July, to 4.65 million units.  This, we were told solemnly, would be the worst since 2009.

In hindsight, those making the predictions seem to have been the sort of wild-eyed optimists whose sunny belief in the strength of the housing market got us into this mess in the first place.  The actual figure for home sales, according to the National Association of Realtors, was 3.83 million–a 27% decline.

The home buyers tax credit ended in April and this is the result. The credit didn’t create new demand—it took existing demand and artificially compressed it into a smaller period of time. In this way, it inflated demand while it was in effect and inflated housing prices as well, and thus put off (but didn’t avoid) a necessary contraction after the 1997-2006 housing bubble. We will now live through that contraction.

We could have suffered through it earlier, but we decided to delay the pain.