The stock market is at equivalent lows to times dating back to the Great Depression (which for those of you needed date measurements is almost 75 years ago).

In 1987 there was a stock crash but not like now.  Now there are other more compelling issues regarding the financial trust between banks and their customers and between banks that have money and banks that need money.

Typically there is a daily operation by your bank where at the end of the day they take their extra money and invest it in overnight depositories which go to distribute money to other banks that need money to fund new loans or to cover short term contraction of deposits.  The money loaned out overnight is always back the next day - well that's the problem apparently, since now it is not always back the next day. 

With this uncertainty, banks with money want to hoard it, leaving banks needing money to beg for it from the public by offering higher than normal short term interest teasers.  That's why you see those advertisements popping up in the newspapers.  Ever wonder why two banks on the same street offer short term interest rates varying as much as 25%?

So here is the housing problem -

 1.  Buyers qualifying for a mortgage have a Herculean task in this market.  If banks don't want to lend to each other, imagine them giving a loan to a complete stranger to buy a new home!  Home loan applications were up last week as rates begin to dip (below 6%) but will the loan applications end up as successfully closed loans?

2.  Even cash rich buyers are reluctant to buy - investor buyers don't buy when the market is dropping and don't buy until the market begins to recover.  Why?  Investors want liquidity.  There is no liquidity on the way down to a market bottom and little liquidity at the bottom.  It is on the way up, no matter how slow that is, where a sale of an asset can occur, even if it is at the same price at which the asset was purchased.  But at least it is not lower.

There is hope -

Fortunately, there is always someone out there that needs a roof over their head and has the ability to find the cash or mortgage to purchase the home.  And there is always the investor that sees opportunity when others see gloom.

Our government is trying to address the tight fisted mindset with cash injections and even offering to make loans directly to large borrowers and homebuyers and offering refinancing opportunties.  But consumer confidence is falling to depths unknown, and with continued employment on most peoples' minds there is not going to be a lot of spending going on (except at neighborhood bars).

The end result - we are in right now probably one of the worst quarters for home sales and even commercial transactions in the past 20 years.  So sit tight, plan your strategy for survival and use the time wisely to re-invent yourself to grow with what will eventually be a new day.