Why the Credit Pendulum Is Stuck at 'Stupid'

Lately, the continued deep-freeze in the traditional market has to some extent been veiled by the brisk sale of foreclosed houses. In April, distressed transactions made up nearly half of all existing house and condo sales, the National Association of Realtors said. In May, they were a third.

That means traditional or so-called move-up sales, where the parties at both ends of the transaction are individuals instead of banks, are limping along at an annual rate of about three million, the lowest figure in a quarter-century.

“Without further action, we’re not going to stabilize,” said Steve Murray of Real Trends, a Denver research group. “The real estate recovery will take 10 or 12 years.”

There are plenty of plans to unlock the market.

Members of Congress are proposing to extend and enlarge an $8,000 credit for first-time buyers, which is due to expire in December. One bill would extend the credit to all buyers through next June. Another would extend it to all buyers through 2010. A third bill would expand it to $15,000 for all buyers.

Some economists, noting that tax incentives helped stoke the boom, say these proposals should be shunned. “When do you decide enough is enough?” said the housing consultant Ivy Zelman. “I don’t want to feed the drug addict with more drugs.”

The continuing deterioration in traditional real estate can be seen in the market in Massachusetts, where the economy, as measured by the unemployment rate, is better than in the nation as a whole.

Yet sales of single-family homes in Massachusetts in May were tied for the lowest level for the month in the 22 years since reliable statistics were first assembled, according to Timothy M. Warren Jr. of the Warren Group, which collects real estate data. Condo sales were only marginally better.

As bleak as those numbers may be, they do not fully convey the troubles here in the upper half of the market. In towns where the median home price is above $500,000, sales during the first five months of the year were 21 percent below the level of 1990, when the state’s population was smaller and the local economy equally in crisis.

Real estate agents, always optimistic, had looked for some recovery this spring, the strongest season in the Northeast. Mr. Warren said he was more pessimistic, but was disappointed anyway. “There’s a lot of pent-up demand, but it takes nerves of steel to buy,” he said.

Dr. Komarovskaya, the rejected dentist, tries to be philosophical about missing out on that two-bedroom condo she wanted in the Dorchester neighborhood of Boston. She understands that after years of mortgage abuse and fraud, the rules had to be tightened.

But what might be an inevitable process in the larger economy is a burden on her personal finances. “Renting is a waste of money,” she said. Having no choice, she has dropped plans to buy and signed a new apartment lease.

This story originally appeared in The New York Times

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