Complications to Housing Recovery

So, yesterday I mentioned some news that's sparking claims of a recovery:

U.S. home sales rose 7.4 percent in November, according to the National Association of Realtors, while in neighboring Massachusetts, the single-family sales spike mirrored that of Rhode Island, at about 60 percent.

However, enthusiasm must be tempered by this:

The 11 percent slump in new home sales from October's pace shows that consumers are taking their time following an extension of a deadline for first-time buyers to qualify for a tax credit. The incentive, worth up to $8,000, was set to expire at the end of November. But Congress pushed back the date to April 30 and expanded the program to include current homeowners who move.

And this:

The industry group's mortgage applications index slid 10.7 percent in the week ended Dec. 18 to a seasonally adjusted 595.8, the lowest level since the week ended Oct. 23.

An index of demand for refinance loans dropped 10.1 percent and requests for loans to buy homes fell 11.6 percent last week.

The tax credit for buyers, by the way, has been extended almost to summer, and expanded to include wealthier consumers.

It looks as if November's increase in overall sales derived from folks who had set up their transactions to cash in on the tax credit before the end of the month, buying less expensive existing homes, and now that months have been added, the market has returned to wait-and-see mode. There are a number of economic angles to this scenario, but it takes an effort of imagination to discern a sustained economic recovery in it. Indeed, as the link related to new home sales puts it:

The results show how reliant the housing market has been on government assistance. About 2 million homebuyers have taken advantage of the tax credit of up to $8,000 for first-time buyers, the National Association of Realtors estimated this week. Another 2.4 million are expected to either tap that subsidy or another one for up to $6,500 for current homeowners.

The only way increased government spending is defensible as an economic solution is if it's a short-term boost predicated on a visible and pending boom in the private sphere or if the spending accompanies a dramatic change in regulation and such meant to grease the private sector machinery. What's currently happening is that the government is spending borrowed money through various incentive programs while complicating regulations, with everything from financial industry manipulation to the purchase of car companies to cap-and-trade to the healthcare monstrosity.

The bill on both the borrowing and the complications is going to come due, and when that happens... well, I'm not inclined to imagine the outcome too vividly on the day before Christmas.