The former Goldman Sachs employees — err, the federal government — have decided to bail out Fannie and Freddie and the race to call another bottom in equities, not to mention housing, is on.

Reality, however, is not a friend of these hopeful bulls.

Let’s take a quick scan of the economic landscape and see what issues the latest bailout has solved.

• - The unemployment rate seems to only be going up, and unless the new federal agency charged with keeping tabs on the two mortgage giants is hiring en masse, there won’t be much of a change here.
• - The dollar could see its recent rally erased after our trading partners and investors around the world come to terms with the $200 billion the Treasury department just dumped into the blender to cut 50 bps off mortgage rates. And, take note, those are prime, Agency rates, and that’s it.
• - The unfortunate reality is that most Americans are still in debt and cannot afford a down payment on a house, a requirement that’s yet to be removed.
• - Gas prices have fallen, but not by as much as crude prices. Hurricane season is alive and well, threatening most of the gulf oil rigs. Oil companies are already under pressure from tumultuous markets for their black gold and are not likely inclined to lower prices further.

As painful as it is to admit, Fannie and Freddie probably needed to be bailed out to keep the entire financial market from collapsing but it doesn’t mean we are at “the bottom.”

It takes awhile for a fundamental shift in lending to play its way out and that is what we are in the middle of. The middle class is being squeezed more than ever and consumer credit quality on the whole is not going to start improving tomorrow.

More important than any of these points is we do not know what our friends at the government are going to do with Fannie and Fredie and how long it is going to take them to do it. In fact, trusting the very folks who ran these companies into the ground — albeit under different leadership — to turn them around is hardly a comforting proposition.

In the end, we need to remember that you need a good credit score and a down payment to buy a house in the real world. So no matter what a television analyst on TV who makes $500,000 a year tells you, this credit crisis is far from over.

Click here for details on this House of the Day

Value: $250,000
Projection: Depreciating

Fallbrook is located in Eastern San Diego County, just south of Temecula along Interstate 5. The city and the surrounding area are being adversely effected by the economic slowdown, as much of the growth in the area was due to new home construction. High gas prices are also weighing on consumer spending in an area dominated by commuters. As a result, home prices have fallen dramatically from their peak in late 2005 and continue to fall.

Our property is centrally located, making it more desirable than those on the outskirts of town. There are, however, many listings in the subject’s immediate vicinity. The property also requires some “TLC,” which indicates its condition is likely inferior to its neighbors. Listings in the area range from $273,900 – $549,000. Only three properties have sold in the area since April 15th, all of which are superior in quality to the subject.

515 Shady Glen road – aside from having a suspect address – is a similarly sized home, but in turn key condition. It sold for $265,000 on 6/19/08. The subject is on a slightly larger lot, but the inferior condition, combined with the weak local economy, high gas prices and an oversupply of houses place the value of the subject property at $250,000. Further declines are likely in the near future.