I am copying this comment from the Wells Fargo Securities weekly report dated September 17, 2010:

Record low mortgage rates have not yet produced much of a lift for home sales. Sales of both new and existing homes appear to have risen modestly following their sharp declines in July in the wake of the expiration of the homebuyer tax credits. However, no significant improvement in sales or construction is expected to take place until the spring homebuying season. By then, the economy should have put up a fairly lengthy string of modest private-sector job gains, which should bolster confidence and household formations.
New home construction is being limited by the still enormous supply of vacant homes for rent and for sale. We continue to believe this measure is the best gauge of the oversupply of housing on the market. The current inventory totals 4.4 million vacant homes for rent and 2.0 million vacant homes for sale. The normal inventory would be around 3.2 million vacant for rent and 1.3 million vacant for sale. As sales recover over the next two or three years, this excess supply will gradually dissipate. During this period, new home construction will likely remain constrained relative to job growth and household formations.
The threat of foreclosures is again taking center stage, with anecdotal reports showing a surge in foreclosures occurring in August. The large number of homes currently in foreclosure and the high percentage of homes with negative equity and/or seriously delinquent mortgages are keeping homebuyers and builders on the sidelines until they better understand the impact of this shadow inventory on prices, appraisals and mortgage underwriting. States like Nevada, Arizona, Florida, Michigan and California, which tend to lead the nation in foreclosures and the share of homes with negative equity, are most at risk for additional price declines during the second half of the year. The prospect of additional price declines is making the appraisal process more perilous and may freeze up the sales process in many challenged markets.

Source: Wells Fargo Securities