Via Calculated Risk blog, some examples of how dependent the market is on first time home buyers and investors. Now that we have a new (and improved) tax credit of $6500 rolling through Congress to the move up buyers we'll see if government can incentivize that class to start daytrading homes as well. The only issue is so many of them are underwater on their homes, [Oct 9, 2008: WSJ - Nearly 1 in 6 Homes Underwater] [Mar 9, 2009: One in Five Houses Underwater] so it is sort of difficult to move out to buy a new house (even with government handing free money out) when you still have your old one to deal with. Unless, a new national fraud is institutionalized - that is (1) buy the new house with the taxpayer's money, and (2) then walk away from the old one. You take a hit on your credit report but oh well - you have a new house, much cheaper, and the taxpayer can deal with the mess. In about 5 years you are good to go as the default moves to the bottom of your credit report, and within 7 years.... all gone. Let's see if we start hearing of rampant examples of this strategy by next spring.

Here are snippets from 3 of the hardest hit markets - we won't rehash what the housing market would look like without $1 Trillion+ of national treasure wasted by the central bank to push mortgage rates down below reality, and billions spent to pull in first time home buyers from 2010 and 2011 into 2009.

While housing prices are now far more affordable then they were just a few years ago, and the median has reached the upper end of where I projected in 2007 (when almost all the cheerleaders pundits declared housing prices could not fall nationwide in America) [Dec 6, 2007: Analysis - What Should Median Housing Prices be Today?] I am convinced the action of our leadership to keep prices elevated, will lead to yet another leg down. Certainly it won't be so frenetic as we've just seen, because 30-40% drops from here would have prices back to 1980s levels, but unless we're going to permanently have a $8000 tax credit (therefore simply pushing the prices of all homes $8000 higher than they should be) and mortgages rates will never again see the light of >6%, we're living in a new mirage. Further, I expect a whole new supply of homes to come on to the market in about 3 years from new buyers using the FHA programs of bad credit!? no problem! nothing down to boot! financing we've now institutionalized ... Subprime Nation lives on. [May 6, 2009: FHA - The Next Housing Bust] [May 8, 2009: Minyanville - Subprime Lending is Back with a Vengeance] [Aug 12, 2009: WSJ - The Next Fannie Mae - FHA/Ginnie Mae]
Via Calculated Risk
Las Vegas:

In September, a popular form of financing used by first-time home buyers – government-insured FHA loans – accounted for 53.8 percent of all home purchases, up from 52 percent in August. Absentee buyers bought 40.4 percent of all Las Vegas–area homes last month – the highest figure for any month this decade. Absentee buyers are often investors, but could include second-home buyers and others who, for various reasons, indicate at the time of sale that the property tax bill will be sent to a different address.

Think about that for a moment - investors (as a % of all purchases) account for more purchases in Vegas than at the height of the bubble. Combined, these 2 forms of purchase account for 94% of all purchases in the recovering Vegas market.

Miami:

A popular form of financing used by first-time home buyers - government-insured FHA loans - accounted for 45.0 percent of all September purchases, while absentee buyers bought 29.7 percent of all homes last month, according to an analysis of public property records.

Again in Miami, these 2 forms of purchase account for 75% of all purchases.

Phoenix:

First-time buyers and investors remained the market’s lifeblood. Last month 46.7 percent of all Phoenix-area buyers used government-insured FHA loans, a popular choice among first-time buyers, according to an analysis of public property records. Absentee buyers made up 38.5 percent of all purchases ...

Figures in Phoenix actually surpass Vegas!  95% of all purchases are due to these 2 type of buyers. The move up buyer is nowhere to be found.

As Calculated Risk concludes

We are far from a healthy market ...