There are plenty of homes for sales, both in California and the nation. But new homes sales fell again in August, continuing a six-month trend of decline. What gives? Interest rates are at historic lows, and Federal Reserve monetary policy for the past two years has been designed to keep them there — and drive them even lower. The above chart, from the Federal Reserve Bank of Cleveland, is telling. To sell a house, you need three things: a seller, a buyer — and a bank that will write a mortgage. What we have right now is a distinct absence of banks willing to make loans, or only willing to make loans on restrictive terms. Until that changes, we're looking at below-average mortgage-origination levels for a while.
Also note that refinancing originations don't look too good, either. This is proof that plenty of borrowers are too far underwater in their homes to make refinancing an option.