It never seems to fail. Every time we begin to see what looks like a housing recovery taking shape, the next day's headlines shoot it down. For instance, this past week we were encouraged to see declining wholesale inventories, which means that U.S. wholesalers are drawing more warehoused goods to meet a slight rise in demand. That raises the prospect of a ramp-up in manufacturing production in coming months, which seems like a sure sign that economic recovery is gathering strength again, a good sign for housing...even though housing, not manufacturing and retailing, ought to be leading recovery rather than following those other sectors!

Wholesale inventories fell in September for the first time since December of 2009, according to data released by the Commerce Department. The 0.1 percent drop in inventories was accompanied by a slight rise in sales. While still slow, sales may have exceeded expectations, so companies responded by tapping inventories. That led some economists to raise estimates of fourth-quarter GDP growth. Macroeconomic Advisers upped its estimate from 2.6 percent to 2.9 percent.

However, no sooner had that news put a little sping in my step than I saw the report from the National Association of Realtors that home prices across the country are still dropping. The national median price for previously occupied homes sold between July and September dropped 4.7 percent when compared to the same period a year ago. Prices declined in 111 markets, rose in 39. The national median price for a single-family home fell in the third quarter to $169,500 from $177,800 a year earlier. And just to hurl a little more toxic sludge on consumer sentiment, this morning The Wall Street Journal informed me that concerns are rising that the Federal Housing Administration could run out of money if the economic recovery doesn't grow some legs soon, raising the prospect that FHA may soon join the list of agencies requiring a taxpayer bailout.

FHA-insured mortgages are vitally important to builders in today's market. FHA has long served the first-time buyer segment of the market, which is the critical portion for housing market recovery. At the end of August, it guaranteed 7.2 million mortgages worth $1 trillion, a record sum. The bulk of FHA's anticipated losses, according to the WSJ story authored by reporter Nick Timiraos, stem from loans made in 2007 and 2008 (no surprise), while recent loans have among the best credit characteristics in the entire FHA portfolio. "Without the FHA, the housing market would not be in recession, it would be in a depression," Kenneth Rosen, chairman of the Fisher Center for Real Estate Research at the University of California, Berkeley, told Timiraos. So now we can add FHA solvency to our list of worries!

But I retain my optimism that housing recovery is coming. Eventually, consumers develop headline immunity. They hear so much bad news that it no longer registers, and instead, they begin to focus on the bargains they see right in front of them, in their own individual markets, rather than national statistics. And as rents keep going up, ownership housing looks better and better. Take a closer look at the data from NAR's home price survey. Sure, the national numbers are depressing, but home prices rose 23.7 percent in Grand Rapids, Mich., and 17.7 percent in Melbourne, Fla.  First-time buyers, with automotive jobs in Michigan, and retiring Baby Boomers looking for sunny vistas, are spotting bargains and buying homes. Those are the market segments with massive pent-up demand. That's what will drive housing recovery. And it's coming.