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Rising Home Sales Obscure Foreclosure Crisis

The ever-boosterish National Association of Realtors said this morning that sales of existing homes in the U.S. have risen for four consecutive months for the first time since 2004. Investors are cheering.

"The housing market has decisively turned for the better," said NAR chief economist Lawrence Yun in a statement. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales," he said.

Yes and no. It's undoubtedly good news that home sales in devastated real estate markets such as San Diego and Orlando, Fla., are climbing. The increase also suggests that public policy aimed at luring first-time home buyers back into the water is having a positive effect.

But as the NAR survey notes, nearly one-third of home sales in July were for distressed properties. That means much of the uptick is being driven by a surge in foreclosures. Delinquency rates for mortgages on one-to-four unit residential properties are at a record level. That's not going to abate anytime soon. Many homeowners remain underwater on their mortgages, a delicate state of affairs given the rising unemployment rate in the U.S.

What the NAR characterizes as a decisive turn in the housing market is, in fact, an extended slog through the mud that will take us well into next year. Yes, it's a necessary step on the road to recovery. But we're still a long way from home.

Map courtesy of RealtyTrac