The housing market remains oversupplied by 860,000 units when compared to a 10-year average inventory and the overhang represents a direct contradiction to the spirit of this week’s headlines describing new data from the National Association of Realtors.

Major media said that “Home Sales Exceed Forecasts” (Bloomberg) and “Sales Rise 7.4%” (Wall Street Journal) and “Sales of Existing Homes Surge” (MarketWatch) and the data providers described “Another Big Gain in Existing Home Sales” (National Association of Realtors) .

If you view the chart above you see supply exceeds long-term inventory averages by 32% — a significant hurdle despite a count of months-of-supply inventory which is just 12% above average and is practically normal (see below). The disconnect in the measure of excess between units for sale and months of supply suggests a logical problem with the data.

If you were to depend upon the months-of-supply figure, you would estimate the market is very close to a long-term equilibrium. Look next at the unadjusted unit-sales figures — which are the only figures I look at because they are the real numbers.

The unit-sales numbers look less promising when you see that unadjusted sales figures show the last 12 months of activity is very similar to a bad year last year (see above). We are headed in to the doldrums this year with a special un-trainable child locked in the attic: A mammoth set of delinquent mortgages (see chart below where X = the set of inventory plus delinquent mortgages.

And 3.5 million units for sale is not nothing when it should be 2.7 million.

With the most knowledgeable sources saying that the cure rate for delinquent mortgages has fallen in to the abyss of “rarely or never” (see below), you would be right to conclude that the federal government can only stop this hellfire by actually paying  the monthly bill for homeowners who are behind. Since they are funding every new mortgage, maybe it’s possible they can pay the mortgage too? Think of it as citizen-friendly quantitative easing.

You can’t fight the Fed, but even Superman cannot win in the presence of kryptonite. Foreclosures are kryptonite. It’s possible the United States government can be beaten. The trend in mortgage payments says they will lose.

The inventory of existing homes for sale is not a source of intelligent confidence. Overall, I see a year of weak sales when the actual number of units sold is compared to the trend in the last 10 years.

This is especially true in light of radical and draconian intervention via Fannie, Freddie, FHA, the home-buyer tax credit, the purchase of mortgage-backed securities, and the equity credit line Fannie and Freddie depend upon for solvency. And a third of unit sales are distressed sales.

If the Fed and Treasury fail in their desperate mission in the housing market, every recent purchaser will be a victim of fraud. Even if the Fed and Treasury are successful, the hardball risk has not been disclosed to new buyers. These consumers don’t have slightest idea what it means when Fed and Treasury are pulling a dozen rabbits out of their hat to fund every new mortgage in the United States.

The Fed and Treasury are now perpetrators of a fraudulent scheme probably greater than any market manipulation previously known to the history of the world.

The first time homeowners dancing to their positive tune may very well be remembered as dead persons buying. Honestly I think even Angelo Mozilo, the legendary leader of the greatest originator of garbage mortgages in the bubble boom, would find this game too unfair and corrupt.

Look who is running the systemic criminal enterprise now.

Michael David White is a mortgage broker in Chicago.