On the demand side, many would-be buyers are deterred by worries about their own finances or about the economy more generally. Other prospective homebuyers cannot obtain mortgages due to tight lending standards, impaired creditworthiness, or because their current mortgages are underwater – that is, they owe more than their homes are worth.
On the supply side, the large number of vacant homes, boosted by the ongoing inflow of foreclosed properties, continues to divert demand from new construction. After posting strong gains over the second half of 2011 and into the first quarter of 2012, manufacturing production has slowed in recent months.