Can Housing Prices Continue To Fall?

                 Can Housing Prices Continue to Fall?

                   Certain signs seem to point to a             bottoming out of the real estate market

It is quite possible that we are beginning to see the bottom of the housing market. We are not at the bottom yet and we don’t expect a general rise in home prices to accelerate rapidly, but there are indicators that the slide is slowing and a bottom could be on the horizon. If this sounds a bit vague, it is because there are still other factors that could offset any gains that we may see. It’s still anyone’s guess, but word on the streets of real estate is positive.

Applications for mortgages had a healthy upswing last week, providing some hope that the trend will continue. The Fed has indicated that they will hold interest rates at current levels at least for the next couple of months. Both mortgage applications for purchases and refinances were up 6.6%, a healthy gain. However, this week saw a big drop in applications, indicating that the demand for housing is still in a upswing-downswing volatility that may still take a few months to level out into a steady more forward.

The housing dilemma seems to be improving in California. At first it may not mean much to you if you do not live in California. However, historically, California has been considered a leading indicator of where real estate will be headed for the rest of the country. There have been increases in California housing values over the last three months at a 4% rate. In addition, the number of homes on the market there has dropped significantly. If California’s real estate trends continue to be the bellwether for the rest of the nation, then things are looking up.

There are some government initiatives in the works that are designed to help low to median income families purchase foreclosed homes in neighborhoods that have had a hard negative economical impact.As with most government initiatives, there is a mound of paperwork involved, which is a task put on local governments who are already struggling under the strain of the many programs that are being pushed down from Washington.However, we do hear that the process of getting people into foreclosed homes is going better than expected and we will hopefully see the benefits soon.

The First-Time Home Buyer Program may get a boost from Congress, if things go well, that will get more folks into a home. There is a bill under consideration that will expand the credit for the purchase of a home to all home buyers, not just first-timers. In addition, Congress did approve the use of the $8,000 credit as down payment money. Mortgage companies and banks are now allowed to use this money towards the mortgage. Now, if Congress would only increase the credit to $15,000, which has been floated around, we would expect to see a dramatic rate of improvement in the housing market. At least the government is moving in the right direction in that regard, although nothing is certain yet.

Are we truly seeing an upswing in the real estate market that can continue and bring us and the economy out of this mess?We hear from real estate pundits that some indicators of improvement are strong and certain confidence abounds, but no one is sticking his or her neck out to make a positive statement. There are too many factors of variability that defy an accurate prognostication of events to come in the US housing market.

A key factor in sustaining any meaningful improvement in the housing market will be home buyer confidence. There are enough potential home buyers who are ready, willing, and able to buy a home, but they are holding back because of too much uncertainty in their lives. People are frozen with inaction because of the news of rising unemployment, they are concerned about their job security, and for those home buyers who have to sell a home before they can buy another, they are fretting about the ability to sell their current home. Sad thing is, these are all legitimate concerns.

As we all know, real estate is local and not all areas are experiencing the same trends. There are some cities and towns where the housing market has held steady for long periods of time. There are areas that are seeing an increase in home sales at market prices and there are also areas in which home sellers are still underwater and the situation in housing is still dire. Overall, things look like they are taking a turn for the better. But don’t uncross your fingers just yet.

Till Next Time,Your "Insider Real Estate Letters" Editor