Just a short while ago, the financial pundits announced the stock market had bottomed out. Their reasoning for the proclamation was that the market had reversed with a 30% upswing. Now the talk of a market bottom has faded. In hindsight, the 30% increase in market averages may represent the classic bull trap. The S&P 500 stock index has declined by 7% in the last four weeks.

Some analysts compare the current situation to one in 1938. The stock market had a similar up-tick but then resumed its’ fall and did not begin to rise again until 1942. The historical analysis is definitely interesting but not conclusive proof that the market is going to repeat the 1938 pattern.

What does all this have to do with our current San Diego housing market? For the last three months the average home price in San Diego has increased, and once again ignited the siren call of “buy it now before you end up paying more.”

Obviously, being a San Diego real estate broker I hope that a three month uptick in housing is indicative of the bottom, is correct. However, a little voice in my mind that tells me this could be something similar to what our equity markets are just discovering.

In media reports on the San Diego housing market, I have yet to see one that advises caution. Some facts about the San Diego market that are troubling to me are:

One) March through the end of August is seasonally the strongest time for home sales in San Diego;

Two) During this time, the state of California has been offering 5% credit up to $10,000 on new home purchases;

Three) There is a federal $8000 credit for first-time homebuyers;

Four) Unemployment has been rising. California state workers have been forced into furloughs that amount to a 15% pay cut.

Five) Prime adjustable mortgage resets are just beginning. San Diego home owners may wake-up to how deep in negative equity they are.

Six) the government is putting out $2 trillion in new treasury offerings this year. Many believe this to be an oversupply that will cause the bid prices on the treasury notes to fall and the yield, which affects home interest rates, to rise.

Seven) The federal reserve has an ongoing program where they buy treasury bonds, and other US debt, in an effort to contain interest rates. How long the government can afford to do this without causing hyperinflation down the road, remains uncertain. Bill Gross, the head of the world's largest mutual fund predicted that the federal debt has a share of gross product at 45%, and could balloon to 300% over the next 10 years. Mr. Gross' scenario could actually play out, as some believe. Looking back just a few years, how many of those people would have predicted that our housing market would turn into such a disaster?

Comparing the positive points in the last three months, the bounce in San Diego home values seems reasonable. Comparing all the factors discussed in the above article will lead one towards caution rather than blind optimism.