FHA Head David Stevens:

This is a market purely on life support, sustained by the federal government. Having FHA do this much volume is a sign of a very sick system.

Remember when we pointed out the entire residential real estate market is a ticking time bomb, propped up by the government?

Seems the FHA, which is guaranteeing more loans than Freddie Mac and Fannie Mae, thinks so too.

The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners.

The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90 percent of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.

The above quote is in the midst of a feel good existing home sales report:, which increased 7.6% for the month.

Existing-home sales1, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March.

The surge was attributed to the tax credit, which is now expired.

Meanwhile inventories increased.

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply2 at the current sales pace, up from an 8.1-month supply in March.

NAR seems to believe the pricing correction is over, as stated in the press release. With that level of inventory? hmmm....

Meanwhile Calculated Risk sees this housing report as very weak.