House Sales Jump -- Blip in a Longer Bear Market

News has traveled fast in the real estate agent community that California home sales have jumped by about 2/3 in the latest period owing to low, foreclosure-induced market-clearing prices, as Bloomberg reports.

But your home could remain a depreciating part of your asset allocation for some time to come.

That's why we say caveat emptor.

• A major new wave of job losses will probably flood the market with new homes, which will drop the market-clearing prices further.
• Mortgage rates could stay high as the credit crisis rolls further around the world, further shrinking the number ultimate buyers for U.S. mortgage paper.
• And, after the current "flight to safety" in U.S. treasuries passes, interest rates in the U.S. could rise broadly as huge buyers of U.S. securities -- emerging foreign economies -- hit deep crises of their own.