Headline: Housing Recovery May Be Held Back By Oversupply

According to this story, housing inventory is at a 16 year high but this does not reflect the cancellation of new home sales contracts (ouch!). "It is far too early to decide that the housing market is out of the woods. The subprime mess may affect home sales if large numbers of buyers find out they can not qualify for a mortgage and foreclosures may dump more houses onto the market. Even if demand does increase, the remaining excess supply will hold back price appreciation and even lead to price declines in some local markets."

See http://www.mortgagenewsdaily.com/4122007_Housing_Recovery.asp

Follow that story with this one. "Mortgage rates around the country rose for a second straight week with 30-year, fixed rate mortgages averaged 6.22 percent this week." Well that doesn't bode well for reducing housing inventory. If subprime borrowers have fewer options, that's already one strike against a quick housing market recovery (after all, fewer potential buyers means fewer sales, doesn't it?). Strike two is where you have marginally qualified buyers...but when rates rise, those on the margins with an acceptable DTI ratio might become unqualified. The full story: http://www.businessweek.com/ap/financialnews/D8OF76205.htm