The Housing Market Deception

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At first look it seems as if the housing market received a hopeful bit of news on Friday. But first looks can be deceiving.

On Friday, there was word that home sales enjoyed a nice boost. Speculation even began surfacing that the housing market had turned the corner.

According to the National Association of Realtors sales of previously owned homes rose 5.5 percent last month. That’s the biggest gain since July 2003, and the inventory of unsold homes fell, another hopeful sign for a housing market mired in a long slump.

But don’t be deceived counsels CNBC’s Diana Olick. She says a large percentage of those sales were foreclosures or something close to it.

In fact, keeping people in their homes is at the center of a new plan introduced by FDIC chairwoman Shelia Bair. She advocates government guarantees for troubled mortgages to try to induce lenders to modify terms.

Essentially the government would shoulder some of the losses if lenders reduced monthly payments so homeowners could hold onto their houses.

Former Fed Governor Wayne Angell thinks getting more Americans into homes lies at the heart of the solution. But he thinks that can only be accomplished if regulators restore Freddie and Fannie or create some kind of equivalent.

“It’s one thing to get price declines in the housing markets it's another thing to have financing channels available so buyers can secure a loan,” he says on Fast Money.

But as Americans we love a bargain, and if the government can provide the financing Angell thinks we'll quickly notice housing prices at historic lows. In other words, it's only a matter of time for human nature to take its course.

“If we do that than over the next 18 months more and more people will buy a house. And I want to get as many people into that game as possible.”

Then and only then does Angell think we'll turn the corner.

What do you think? We want to know.






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