In July 2008, the crumbling housing market started pulling down the whole U.S. economy. By September, millions of mortgage defaults had touched off a meltdown on Wall Street.
Today, financial markets have stabilized, but the housing market remains deeply troubled. New industry data show both sales and prices are slipping again in many markets, despite record low mortgage interest rates.
The market's weakness is "being driven by people's fear that they won't have a job next year," says Lucien Salvant, a spokesman for the National Association of Realtors.
The housing market had been bolstered in the first half of this year by an $8,000 first-time homebuyer's federal tax credit. "The tax credit was good -- it helped stabilize prices and eliminate some of the inventory" of unsold homes, Salvant says.
But the tax break expired April 30. In May, new home sales plunged 33 percent as buyers evaporated. Now, preliminary estimates by several companies that track real estate show prices may be softening again in many markets.
Realtors are not expecting Congress to try again to shore up the market with new tax breaks. Lawmakers are keeping their focus on budget deficit reduction, not on tax-break creation. "Renewing the tax credit has not come up," Salvant says.
The one bright spot is mortgage rates. Last week, mortgage giant Freddie Mac reported the average rate of interest on a fixed-rate 30-year mortgage has slipped to 4.57 percent. That is the lowest level ever recorded since Freddie Mac began tracking rates in 1971.
Salvant says the combination of low home prices and extremely low interest rates could help the housing market start to get some traction, even without the tax credit. Realtors are cautiously optimistic, with many saying, "Let's see what's going to happen," he says.
Mortgage Rates Sink
Weekly rates, in percent, for fixed 30-year mortgages