Is the "housing recovery" for real?

Are we really witnessing a turnaround from the housing crash and/or economy? For many obvious reasons, I don’t think so. Now what I do think we might be seeing are a couple of short-term results of the pumping of massive taxpayer dollars into failing banks and sustained, artificially low interest rates.

By the way, let us not forget that these two actions will be responsible for some highly undesirable consequences that will affect you directly. The pumping of trillions of dollars into the economy by the government will make you significantly poorer via the soon-to-come hyperinflation (Peter Schiff & Ron Paul predict this will happen in 1-4 years). And by maintaining absurdly low interest rates (just one of the ways the government is refusing to let the housing market find a real bottom (which naturally will take time).

But, getting back to our original question, I think we are seeing 2 things going on in the markets right now.

The first is that we are seeing a refinancing boom due to the insanely low interest rates. This refinancing boom is what is largely driving the relatively good bank balance sheets that we are seeing – and Wall Street is cheering this on as if they are ignorant that this is one-time revenue. If there is a homeowner out there with equity in his home right now (and at least 80% LTV), in many cases he would be insane to NOT refinance right now. And so they are – by the millions Americans are refinancing again. But don’t be fooled. There are not that many out there who can qualify for a refinance (read on for more on this) and once they do, that’s it… no more revenue for the banks from that source. So, this rally that we are seeing in the banks and the stock market is just that – a rally. Be prepared.

The second phenomenon we are seeing deserves a little more thorough explanation. It is the possible existence of 2 separate housing markets. The first is a foreclosure/short-sale market. This is the market that has been spiraling down the numbers in home sales and prices that we have been seeing for the last 2 years of the housing crash. The 2nd market may just be emerging. That market COULD be a temporary recover in housing IN SPECIFIC AREAS and only under $250,000, as even the strongest advocates of a current bottoming of the housing bubble that nothing is moving in the higher-priced real estate market arena.

IF such a “housing recovery” is actually occurring, it will be very short-lived. This is because much of the pickup in sales numbers we are seeing are being driven by first-time home buyers. Once all the first-time home buyers have moved into their home and received the $8,000 tax credit, sales will slow again. This “recovery” also will be short-lived because banks are requiring extraordinarily high down payments and there are simply less buyers out there now that credit scores across the nation are plummeting due to late or unpaid mortgage payments. (See "Banks Fear Housing Market Crash as Mortgage Providers Target 40% Deposit")

Tomorrow we’ll continue looking at reasons why this “housing recovery” is false.