CNN: 3 Reasons The Housing Recovery May Not Last

CNN:

The housing market has made a big comeback over the past year; home prices have surged some 8% and homebuyers can't seem to buy up properties fast enough.
But just as quickly as the market is gaining ground, some industry experts worry it will come crashing back to Earth. Here are three reasons the housing market recovery may not last:

Everyone's got an opinion, so let's look at this one:

 1. The housing recovery is being led by investors. One problem is that investors are leading the latest surge in home prices, said Dean Baker, co-director of the Center for Economic and Policy Research. They are taking advantage of low interest rates and depressed home prices and when those rates and prices rise, they'll likely pull back, he said.

"An investor-driven boom is likely to end badly," said Baker. "I'm worried that some of the big jumps in prices are driven by the same sort of speculation that drove the [original] housing bubble."

Well, yes and no. Investors large and small are taking advantage of low interest rates and prices. However, they mostly plan on renting and then selling when prices and interest rates do rise.That would be reflection of increased consumer demand in general. Some are doing the traditional fix-up flip, but  rentals are strong because a lot of consumers aren't buying.

Hedge funds are, well, hedging against the inevitable burst of the stock market bubble, and there are now fears of a  spreading triple dip recession in Europe. When things go pop and the real financial condition of governments, and banks in general are revealed, money will be driven toward the still low priced and hard-asset real estate market.

2. The economic recovery is just not strong enough yet. "These days, I worry more about the economy hurting housing than housing hurting the economy," said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities, a Washington D.C.-based think tank.

The economy is hurting housing and everything else right now. We are in the worst recovery from a recession in history, and in a jobs depression. Food stamp use has doubled since 2008 and a record number of Americans are on disability, many with dubious ailments and bad job prospects. Investors and consumers instinctively, if not actually know that our anemic GDP and job growth, isn't enough to prevent economic decay, much less repair the damage already done. We will continue bouncing along the bottom, and likely dip below into another recession in 2014, when the remaining uncertainties of Obamacare and Dodd-Frank are fully realized.

 3. Government cuts will hurt homeowners. Headwinds from the current round of government spending cuts -- $85 billion worth -- could also curb the housing market's recovery."The spending cuts from the sequestration [will] hit their apex this summer," said Mark Zandi, the chief economist for Moody's Analytics.

A cut of less than 3% in an already bloated budget that already misallocates hundreds of billions, will have little or no effect on the economy, The Obama administration is doing its level best to create headwinds, as it plays the old statist game of making those cuts as visible and painful as possible. As of now, the public doesn't seem to be buying the absurd notion that the federal government is a lean machine, incapable of withstanding any efficiencies. The sequester pales in comparison to the already hurricane force headwinds of this administration's regulatory jihad, along with current and future tax increases. Besides, the worry over the economic impact of spending cuts is evidence of government  already controlling too much of the economy.