AS I'VE said before, my understanding of the strategy behind the housing tax credit was that it would encourage a wave of buying that would sop up inventory and position housing markets for a sustainable recovery once the economy got growing in earnest. This never seemed like a very good idea, and now the foolishness of the strategy should be clear. Outstanding housing supply was simply too massive to be much affected by the credit, and despite an extension the credit expired while the American labour market remains in the doldrums.

So what we've observed is a shift in timing; what little housing demand existed ran its course before the credit expired, leaving a giant emptiness thereafter. And so the National Association of Home Builders reports:

Builder confidence in the market for newly built, single-family homes declined for a second consecutive month in July to its lowest level since April of 2009, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. The HMI fell two points from a downwardly revised number in the previous month to 14 for July. "We continue to see a lull in home buying activity following the expiration of the federal home buyer tax credit program, as many of the sales that would have occurred this summer were likely pulled forward to meet that program's deadline," noted NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "In addition, builders are reporting continuing consumer hesitancy regarding home purchases due to uncertainty in the overall economy and job markets."

Here's a look at the long-run:

A durable solution to the crisis in housing needed to involve an answer to the epidemic of negative equity and a meaningful labour market recovery. America has neither. And so the outlook for housing will be a bleak one for the foreseeable future.