Multiple offers and builder waiting lists are sneaking into the $800k price range.   Multiple offers are no longer limited to sub-$250k houses.  We know low mortgage rates are one reason for the revived housing market.  I've thought that interest rates, held artificially low by the government, are sure to head up when the government exits the mortgage market, snuffing out the housing bubble they have recreated.

Not so fast.  I was wrong again.  It turns out, the Obama Administration's #1 economic tool has been a housing recovery:

Keeping the mortgage rates at historic lows, which required a commitment of more than $1 trillion, was viewed within the administration as a central plank of the economic strategy last year, senior officials said. Though the policy did not attract as much attention as rescue efforts to bail out banks, it helped revitalize home buying in some parts of the country and put money in the pockets of millions of homeowners who were able to refinance into lower monthly payments, the officials added.

There is some debate among insiders and economists about ending the mortgage support.  However, nvestors who are seeking higher yields are signaling their intent to buy mortgage bonds and keep interest rates low for San Diego and other home buyers.  Why?  The mortgage bonds will be guaranteed by the government.

So, more government intervention.  They exit the mortgage market at the end of March, and to prevent rates from increasing, they agree to back future bond sales.

Some analysts even suggest that Fannie and Freddie, now with greater government backing, could buy more mortgages if spreads widen drastically and the Fed declines to help.

 The reason for the government backing?

On Christmas Eve, Treasury officials announced a move that would cover losses suffered by investors who buy these securities from Fannie Mae and Freddie Mac, which together now back about half of the nation's $12 trillion mortgage market. The goal was simple, officials said. They wanted private investors to be reassured that mortgage securities are safe to buy.

So we are really trading one form of government intervention in the mortgage market for another.  The mortgage market remains on life support after all, and reviving the housing bubble and stabilizing house prices seems to the the Administration's #1 economic tool for recovery.

Our clients have known about the current reflation of the housing bubble for over a year, and this week, the media finally caught on.  

We told our clients that in October 2008, prices stopped falling for the first time since the housing bubble popped a few years earlier.   In late spring, we told our clients that prices started to rise beginning in March 2009.   Since then, prices for homes up to $600,000 are up 10-20%.   How did we know this?   Bob and I developed a market timing method which combines the rate of change in average price by 9 home sizes with months supply, and accurately predates the Case-Shiller index by three months, and we wondered how long it would take for the media to catch on that another housing bubble was generated by the government.  Well,  it's finally here, over a year late!

The problems that led to the last financial crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.....

Over the past year, the federal government has spent hundreds of billions propping up the housing market. About 90 percent of home loans are backed by government controlled entities, mainly Fannie Mae, Freddie Mac and the Federal Housing Administration.

The Federal Reserve is spending $1.25 trillion to hold down mortgage rates, and millions of homeowners have refinanced at lower rates.

"The government has stepped in where the private players have gone away," Barofsky said in an interview. "If we take government resources and replace that market without addressing the serious (underlying) concerns, there really is a risk of" artificially pushing up home prices in the coming years.

The report warned that these supports mean the government "has done more than simply support the mortgage market, in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor."

Barofsky's report echoed concerns raised by housing experts in recent months, as home sales and prices rebounded. They warn that the primary reason for the turnaround last year has been billions of dollars in federal spending to lower mortgage rates and prop up demand.

Once that spigot of cash is turned off, they caution, the market will be vulnerable to a dramatic turn for the worse. Daniel Alpert, managing partner of investment bank Westwood Capital, wrote in a report that national home prices are bound to fall 8 to 10 percent below the lows of last spring.

"The lion's share of the remaining decline will occur in markets that saw sizable bubbles but have not yet retrenched," he wrote.

This Mission Bay craftsman home at 2614 Fairfield St in San Diego, 92110,  is for sale by the owners (FSBO).  The home is advertised on bigbrick.com, a site for FSBOs.  Contact the seller, Greg, at 619-275-1092 or email him at gsmith77_7@yahoo.com

The home is a 3 bedroom, 2 bath, 1570 sq ft, priced at $748,000.

In December, U.S. house sales fell 16.7%, the largest drop in over 40 years.

In San Diego, housing sales rose 17.8% from 2651 in November 2009  to 3122 in December 2009.

Loan modification scams are taking the place of loan scams.  It seems, there are always some people who try to make easy money by fraud.

Read the most common scams and scam stories here.

Legitimate foreclosure and loan modification services are free.  Learn more on my website here.