Crash Helmets, Please

July existing home sales numbers are in and they are devastating: sales down a record 27.2% montly drop to a 15-year low when most people were expecting a 12%, maybe a 15% fall. 27.2% is deep into "Oh crap" territory and the Dow fell off a cliff this morning as a result.

What does this number mean? Real simple, folks: welcome to the second leg down in the housing depression.

Assume the position. It's going to accelerate from here.

[UPDATE] As CalcRisk points out there's now a 12.5 month supply of houses on the market, which is a massive supply glut.   Housing prices are going to fall and fall sharply in the second half of the year.

[UPDATE 2]  Felix Salmon spells it out:  America Stops Buying Homes.

The number is so low that it looks like a statistical aberration: let’s hope it is. Because if it isn’t, the news is gruesome. It means that despite record-low mortgage rates, people aren’t able to buy houses: essentially all the benefit from those low rates is going to people who already own their homes and are taking the opportunity to refinance.

The news also means that there’s a big gap between buyers and sellers: the market isn’t clearing. Sellers are convinced that their homes are worth lots of money, or will rise in price if they just hold out a bit longer; buyers are happily renting, waiting for prices to come down. And entrepreneurial types, whom one would expect to arbitrage the two by buying houses with super-cheap mortgages and renting them out at a profit, don’t seem to have found those opportunities yet.

Houses are rarely a liquid asset; they were, briefly, during the housing boom, but now they’re more illiquid than ever. America is a country where two generations of homeowners have learned to consider their houses an asset; they’re rapidly learning that at times like these, a house can look much more like a liability. (And refinancing your mortgage is just liability management.) The enormous repercussions of that change in mindset are only just beginning to be felt.

Repeat after me:  there is no housing market right now.  This is a full-blown collapse.  Unless some sort of massive government intervention kicks in (which is politically impossible) then the housing market just locked up like an engine with no oil, and our economy along with it.