This is way different than the market for car loans -- the reason why cars' recovery hasn't been affected by slow wage growth or student debt, to name two oft-cited housing culprits. Car lenders are willing to take more credit risk and they are making it work. At Fannie Mae, less than 2% of new loans purchased are to borrowers with subprime credit. About a third of new-car buyers have shaky credit.  People with middling but not subprime credit are getting turned down for houses and driving away routinely with new wheels.

Tight credit and a weak recovery in parts of the South also seem to be hurting builders as they report earnings. Lennar (LEN) reported last month that sales in southeast Florida remain soft. D.R. Horton (DHI) reported its own regional problem, but in Chicago, where unemployment is still 7.5%. Horton, Meritage Homes (MTH) and Pulte Group (PHM) are all down on earnings reports today.

Meritage said second-quarter orders for new homes rose just 1% over last year, part of what MKM Partners analyst Megan McGrath said is a mixed picture. Only Horton, the nation's largest builder, has reported double-digit growth in orders, which signal how many homes it will finally sell later this year. But Horton shares dropped sharply after it said it was boosting sales incentives to move units.

"I'm watching all these stocks get killed. It makes me want to go to lunch,'' McGrath said.

The credit crunch coincides with (and may explain) weak sales in the South, where more people have bad credit. Several different sources confirm that states south of the Mason-Dixon line almost uniformly have credit scores below the national average. With the average credit score of loans now sold to Fannie Mae holding at 741, according to the most recent data, people with scores near statewide averages in Texas or Florida that hover below 700 are going to have some trouble.

Read More: Cramer: Every Which Way But Short

Housing is once again a policy problem, demanding a solution from a deadlocked Washington. With the unemployment rate likely to go well below 6% by the end of the year and housing still stagnant, it's increasingly clear that job growth and low interest rates alone can't do the trick.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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