Ultimately, what this means is that in the real world, there are about 10 million units of “inventory” - which represents nothing more than “REO” homes (those held by the banks), the properties being flipped by speculators, and “distressed” homeowners who are desperate to sell. This estimate excludes any “normal” sellers in the market (i.e. people simply wishing to move to relocate of their own volition).

Thus, the “official” inventories of unsold homes represent less than 1/3rd of actual inventory, and most likely only about ¼. The reality is that U.S. housing inventories have risen to their highest level in history – and added millions of units to the 19 million empty homes which existed a year ago.

When stacked up against real inventories, the sales of only 5 million units this year sets up another nasty “leg” downward for this market by itself. However, as I (and an increasing number of other commentators) are reminding people the second spike in mortgage-resets for the dreaded “ARM mortgages” (adjustable-rate mortgages) is just about to begin