The American economy is a walking contradiction that can not endure in its current state. Today, even as the Case Shiller index reported the eighth successive month of home-price declines, the Dow is posting a multi-year high of 12,600.

    Large companies, such as Caterpillar, Cisco and Microsoft, are posting huge earnings, as homeowners, the consumers, are losing equity in their homes. The fact is that, somehow, the same people who are in danger of being underwater on their mortgages are temporarily finding the means to spend, or are optimistic enough about finding the means to spend to drive up stock prices.

    At first glance, one might reckon that consumer optimism is being driven by an improvement in the jobs market, as the national unemployment rate has improved from 9.8 percent in November to 8.8 percent in March; but those numbers are meaningless. The one-point decline in the percentage of Americans who file jobless claims can be attributed mostly to people leaving the job market altogether, rather than people finding work.

    The real power behind the stock-market rally is the government, and its incessant printing of currency to give to those in need. People, businesses and banks feel free to spend more recklessly now that they have been assured that there is a guaranteed source of cash to bail them out directly upon failure.

    Even the Japanese earthquake and nuclear disaster resulted in only a brief pause to the bullish behavior on Wall Street, and while the radiation leaks at the Japanese nuclear plants were plugged, the real estate market continued to gush its value.

    According to the Case Shiller index, as of February, there has been a year-over-year decline in home prices of 3.3 percent. This sharp decline is worse than even the most pessimistic economists could predict, and worlds away from the 2009 Mortgage Bankers Association prediction that home prices would actually rise by 3 percent in 2011.

    Still, even after this decline, home prices obviously aren't low enough yet to attract buyers, since every week, the windows looking into the Beaufort County Clerk of Court's office are increasingly littered with foreclosure notices, many of which never receive bids above the bank's opening bid and must then be listed and advertised alongside scores of other properties on the open market. And there they will sit for an interminable period of time.

    Knowing this, it is easy enough to see that the real-estate market has not formed a bottom. Therefore, buyers still need to beware. Properties priced to compete with others that are currently on the market are not bargains, even if they are priced at 15 percent under what they were sold for five years ago. Properties may have to reach 1980's level pricing to be worth the risk. There are such deals to be found, but don't be tempted otherwise, unless you plan to live there for at least seven years, when the market may have finally recovered.

    Since the market somewhat improved following government intervention after the 2008 crash, investors have been rather blasé regarding subsequent markdowns in housing. At some point, however, they will put two-and-two together again and there will be another huge correction on Wall Street. This time around, our government, indebted to the max, will be all out of band aids, and we won't be able to play pretend as we have been over the past three years.

    This article provided courtesy of our sister site: Beaufort County Now