Forecasters expected sales of existing homes to rise in June because the pending home sales index, which measures signed contracts, rose in May. If you consider it takes 1-2 months to close, then there's your indicator.

But that was not the case.

Sales fell, not by much, down 0.8% month-to-month, surprising even the Realtors, who thought May would be the weakest point. Sales were down 8.8 percent from June of last year, when most closings took place from the end of the home buyer tax credit.

What Realtors and prognosticators did not even consider was a strange phenomenon: June saw a spike in the contract cancellation rate to 16 percent. Existing home cancellation rates usually run under ten percent, and, in fact, in May were at just 4 percent. Cancellation rates for new home construction usually run higher than that, as buyers of newly built homes tend to be more volatile and put less (often nothing) down when signing a contract.

"I think it's the broader, very slow economic activity," said Lawrence Yun, the National Association of Realtors' chief economist, who earlier told a room full of reporters that he was still trying to find the source of the spike. "The economy is expanding at a very slow pace, job creation is very slow, the consumer confidence has certainly taken hit in the second quarter, so there could have been some buyers who had some second thoughts and just decided to pull out of the contract, but at the moment it's still unclear as to why there was a measurable rise in cancellations."

Tight lending and inaccurate appraisals could play into the spike, but they have really been chronic problems for much of the past year, so no reason why they would suddenly cause a monthly bump. Yun suggested that some banks are looking toward the change in conforming loan limits coming this fall (they will drop in the most expensive markets) and have already stopped making "conforming jumbo" loans, but that really just started in July.

"Buyers may have been spooked by the recent worsening in the economic outlook and the rebound in the unemployment rate to 9.2 percent in June," notes Paul Dales of Capital Economics. "Tighter credit criteria or the fall in conforming loan limits, scheduled for October, may have meant some deals were cancelled as financing fell through."

He also points out that mortgage applications, which were flat on purchases this week and have been seriously lackluster, do not indicate any rebound in sales. Purchase applications are actually quite close to last year's 14-year low. Much of the market is still investors, 10 percent in June, which is down a bit, but the share of international buyers rose to 3 percent, not huge, but more than previous months.

Some are noting a drop in the distressed sales share in June to 30 percent from a high of over 40 percent of the market last year, but the actual number of distressed sales has been steady at 80-90,000 a month. It's just that there were more organic, non-distressed sales overall in June, so the percentage share of distressed fell.

Back to the cancellation issue, my guess goes back to my constant premise of confidence, or lack thereof. Today's consumers are so skittish, so nervous, so unable to believe in any solid recovery, that even a few months of bad data are enough to plant them right back on the fence.

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