Question:  Was the jump in existing home sales in September encouraging, misleading, or ho-hum?

The answer is yes. It is ho-hum because the pending sales index predicted the jump. So there is nothing new happening in the housing market. It was encouraging because it was more good news about a housing market that is in real recovery. The coming months will display a consistent positive movement in real estate. It was misleading because the additional sales were “borrowed” from 2010 because of the expiration deadline of the first time buyer tax credit. We will see sales drop as soon as the credit disappears. The state of the market is such now that even an extraordinary piece of data like a sharp monthly rise in sales can support any argument about the future of the market.

Where is the truth?

My intelligence from around the country tells me that we are somewhere between the last two explanations. Where there are jobs, supressed demand is emerging and sales–unaided by extraordinary government subsidy–are happening.

Yet, where there are no new jobs, the market is almost fully reliant on the tax credit. It strikes me that the best policy for real estate is to encourage in all possible ways the job creation that will guarantee a strong housing market and avoid getting addicted to a government handout that introduces yet another artificial element into the market.