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Credit Rules the Housing Market

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Existing home sales were basically flat in April, down close to one percent month-to-month and down nearly 13 percent year-over-ear, but you have to remember last year we were heavily under the influence of the home buyer tax credit.

Now we are heavily under the influence of the mortgage market, or lack thereof.

It's all in the numbers.

Let's start with all-cash.

Thirty-one percent of buyers in April used all-cash, and that's down from 35 percent the previous month. It's likely because the number of investors buying in April also fell. Investors have been the only real fuel in this market, buying distressed properties at distressed prices.

Just look at the share of what's selling at what price point:

The share of what's selling at what price point:

Region
$0-100K
$100-250K
$250-500K
$500-750K
$750K-1M
$1M+
Northeast -13.5% -28.5% -32.9% -28.1% -17.2% -6.3%
Midwest -9.7% -32.4% -26.7% -4.3% 14.3% -10.0%
South 6.2% -23.3% -16.6% -3.3% 7.9% 11.2%
West 39.4% -9.1% -14.4% 1.9% 14.4% 22.7%
U.S. 2.6% -23.1% -22.2% -10.7% 4.2% 11.1%
SOURCE: National Association of Realtors

The low end is moving (your investors), and the high end is moving because higher-end folks don't always need a mortgage; neither investors nor high-end buyers were affected by the home buyer tax credit last year. The trouble is, the middle of the market makes up the lions share of home sales, over 60 percent, and it's not moving.

What's also juicing the lower end is the fact that the FHA raised insurance premiums on April 18th, so mortgage applications for FHA loans surged 20 percent in the four weeks before and then fell nearly 27 percent the week after. With that surge, you would have thought we'd see a lot more sales, but that wasn't the case.

Realtors are blaming appraisals.

In a survey of their people, 11 percent said they had to cancel a contract because of a low appraisal.

Appraisals, which during the housing boom were laughable, have now swung the opposite direction, towards levels so conservative that they themselves are actually pushing some asking prices lower. And that all goes back to the lenders, to Fannie Mae and to Freddie Mac. As house prices fall, lenders have to be even more careful because risk rises.

The remaining question, though, is why did investors fall out of the market in April, even just a bit? Is it because the homes on the market tend to be higher-priced? Inventories rose by 350,000 in April, which is usually the case in the heart of the spring season. The realtors claim there are fewer foreclosed properties to buy because banks are trying to do more short sales, which take longer. That may be as well. Short sales generally don't lower prices as much as bank-owned (REO) sales.

Whatever the answer, the fact is that we are not seeing any kind of spring surge. A tweet from a follower named "kentuckyloan": business has slowed to a crawl out here on the front lines.

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick