Every day, someone says something about recovery. Housing recovery. Economic recovery. Our country recovering.

But in reality, everyone’s barking up the wrong tree. Perhaps there is NO recovery. Perhaps this is the new normal.

Let’s first look at the argument in favor of recovery. The number of pending home sales is up, sale prices are up, the number of foreclosures is down, inventory is down.

Now look behind the numbers:

• Sale prices are rising because there are fewer properties for purchase.
• Foreclosures are down because banks are trying like hell NOT to foreclose. In some states (New York comes to mind), delinquent homeowners can live in their house for as long as 1,000 days before the bank kicks them out. And pay nothing.
• Inventory is down because the banks are trying not to foreclose.

Underwater borrowers still can’t afford to sell, though. They’re paying their mortgage. And waiting for a recovery that may not come. They aren’t out of work. They just don’t have equity to sell. Something like 10 million Americans are underwater today, in a holding pattern.

It’s a vicious circle, prices increasing because of the lack of inventory. Lack of inventory because people can’t sell or banks aren’t foreclosing. Everyone in limbo.

Everything comes back to supply and demand. Prices may be improving in some places, but not everywhere. We should be focusing instead on number of transactions – volume, not price.

The numbers are never the whole story. Especially in today’s political arena – the numbers work for everyone’s argument. Which means they support no one’s.

For me, this all comes down to two important questions:

1. Is the number of transactions improving? No.
2. What is the truth behind pricing?

I will be convinced there is a recovery when people not only talk about price improvement in local markets, but look at the number of new households being formed and the volume of transactions returning to where it was before the crisis started. I won’t hold my breath.