Don't Be Fooled: False Economic Recovery?

A scathing commentary by Heidi Moore (Comment is free | The Guardian) on what's being called the US recovery — very pessimistic:

Housing prices have risen at the fastest rate in seven years, as the Case-Schiller Index of national housing prices showed today. However, the sources of that rise – as with all sudden booms – are dubious. While house prices are rising, incomes, purchasing power and lending are not keeping up.

The housing recovery, for instance, seems to be just another stage of the foreclosure crisis. Note that the areas where house prices have risen the most – Arizona, Las Vegas and California – are all areas that were hurt most deeply by the housing crash. So pry between the boards of the housing recovery and the termites start crawling out. Here, you'll find some old villains of the last housing bubble, crawling on the same properties. There are the house-flippers and the financial institutions, the foreclosure players that regenerate whenever there is a boom.

There is evidence that lenders are controlling the housing supply by reducing the number of houses for sale. Last year, AOL Real Estate's reporting suggested that as many as 90% of available properties were not even really on the market, but just polished for sale and being held back to keep supply low.

Then, last month, three major banks, including Citigroup and Wells Fargo, halted all their sales of homes in foreclosure; this also reduced the supply of homes on the market. The reduction in housing supply, then, is largely artificial, designed by the banks and institutions that hold thousands of houses and thus have the most to gain from higher house prices. Dont be fooled by the false economic recovery | Heidi Moore | Comment is free | guardian.co.uk

What do you think? Does she make valid points? Is she overstating her position?


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