The housing hype starts again

I have a fear that something bad might be cooking in the housing market. From today's Times...

Property values are set to rise in the next three months as a lack of homes props up prices, estate agents believe.

The number of agents expecting house prices to increase in the coming months outnumber those predicting further falls for the first time since May 2007, according to figures published today by the Royal Institution of Chartered Surveyors (RICS).

There are also signs that activity in the market is picking up, with the average number of sales completed by each estate agent branch rising to 12.7 in the three months to June, up from 11.7 in May. Interest from buyers rose at a record rate in June, agents said.

In a further boost for the economy, high street retailers have reported a bumper June as the heatwave boosted demand for summer food, shoes and clothes. Like-for-like sales rose by 1.4 per cent in the year to June, figures from the British Retail Consortium show.

Lets assume that this story is true and the housing market is, in fact, beginning to recover. Think through the next few steps of the story. Interest rates are at a four-hundred year low, the fiscal deficit is at an historically unprecedented high, and asset prices are beginning to increase.

This is like watching a car speeding towards a brick wall.