There was a slight improvement in the dismal housing market but it’s still too early to tell if the market has hit bottom, says a New York Times story that looks at recent market reports. And the bottom must be hit before things can get better. What’s your take? Are we getting near the bottom or have we reached the bottom?

Home sales have begun to stabilize as sharply reduced prices lured buyers back into the market in July, according to a pair of reports issued this week. And prices, once plummeting at a breakneck pace, fell in June at a more moderate clip.

But prices will have to keep falling, economists said on Tuesday, before the housing market can make a full recovery. Much of the buying last month stemmed from fire sales of foreclosed homes. And prices are expected to keep sagging under the weight of an enormous backlog of unsold homes.

For now, “it’s still a buyer’s market, and likely to be so for a while,” said Stuart Hoffman, chief economist of PNC Bank. “Home buyers are holding all the aces.”

A report on Tuesday showed that in the 12 months through June, American home values dropped 15.9 percent, the biggest annual decline on record.

Yep, sales of new homes inched up in July  but only because the previous month’s sales were lower than first calculated, according to CNNMoney.com story. This is not the first time that the number-crunchers made a mistake. 

The government offered more discouraging news about the housing sector on Tuesday, reporting that new home sales rose slightly in July only after revising the previous month’s number sharply lower.

Sales for July came in at a seasonally adjusted annual rate of 515,000, up 2.4% from 503,000 in the previous month, the Census Bureau reported. Last month, Census had put the June figure at 530,000.

The change marks the fourth of the past five reports that Census has slashed the previous month’s number. The trend worries economists who say a hoped-for stabilization of the housing market remains elusive.

The fabled crime-fighting agency saw trouble in the mortgage industry as far back as 2004, back when housing prices were soaring to record levels, says a story in the Los Angeles Times.  What about you, did you smell trouble way back then? Hindsight is everything, they say.

Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.”It has the potential to be an epidemic,” Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.
Today, the damage from the global mortgage meltdown has more than matched that of the savings-and-loan bailouts of the 1980s and early 1990s. By some estimates, it has made that costly debacle look like chump change. But it’s also clear that the FBI failed to avert a problem it had accurately forecast.

The good news is that foreclosures led to a slight increase in Bay Area home sales in July compared to a year ago. It wasn’t much, just 2.2 percent, but it was first time there was  year-to-year increase in more than three years,  according to a Contra Costa Times story. The bad news is that foreclosure sales dragged down the median home price to $470,000, the lowest level in more than four years.
In Contra Costa County, homes sales soared to 1,730 in July, a 30.3 percent increase from a year ago while the median price plunged 41.6 percent to $350,000. In Alameda County homes sales stood at 1,428, a 9.4 percent decrease while the median price of a home dropped 27.3 percent to $440,000. In San Mateo County, 648 homes changed hands, an 11 percent drop while the median price dropped 16.3 percent to $670,000. In Solano County, 592 homes were sold, a 45.1 percent increase while the median price  plunged 33.7 percent to $250,000.

Observers say that foreclosure  will help clear out the inventory of homes on the market. That has to happen before prices can rise.   What’s your take on this? Are  foreclosures sales helping or hurting the market?

There is an upside to foreclosures: Investors are starting to buy foreclosed properties, then putting them on the rental marker in the Bay Area, according to a stories published in the Contra Costa Times . Another place this is happening is in Arizona, according to a story in the Arizona Republic. Observers point out that rents may drop as more foreclosures become rental properties.

Renting has always been an option to buying a place, especially in today’s hard-pressed housing market where it is harder to get a loan to buy a home. Check out my story in today’s Contra Costa Times on some tips for renting a place. 

 Of course, foreclosures are more likely to hit  low and middle-income homeowners. But the rich and famous are not immune, as shown by this U.S. News & World Report report story. (Ed McMahon can breathe easy, though. Donald Trump has agreed to buy Ed’s home, which is in foreclosure, and lease it back to the Carson sidekick, according to a Los Angeles Times story.

Though seemingly immune to ordinary tasks, celebrities have not escaped the misery of real estate deals gone bad, proving all socioeconomic strata are subject to the slumping housing market. As thousands of Americans grapple with the subprime loan mess, the higher-than-usual foreclosure rate that goes with it, and a stagnant housing market, celebrities also are feeling the pain of bad real estate decisions. Ed McMahon, after his long career as Johnny Carson’s sidekick on The Tonight Show, owes more than $644,000 in mortgage payments on his estate in Beverly Hills, Calif., which he owns with his wife. Facing foreclosure, he is trying to sell the property for $4.6 million, down from its earlier $7.6 million price. McMahon explained the predicament to CNN’s Larry King in simple terms: “If you spend more money than you make, you know what happens.”

Even sadder is the situation of the families whose houses were re-done by Extreme Makeover: Home Edition. A couple of homes re-done as a part of the show are now for sale; their owners can’t afford to pay the extra taxes assessed because of the improvements and added square footage.

There are a lot of goodies in the housing bill legislation that was recently passed to help address the foreclosure crisis. But renters are not so lucky, according to an op-ed piece that appears in the Boston Globe. The Bay Area should take note, since the high cost of buying a home means that many residents are renters.

NOT EVERYBODY in the family tree makes it into the family portrait. Most families have ne’er-do-wells; many families crop them out.

Housing USA is like a family portrait. We see ourselves as a nation of homeowners or wannabe homeowners; and our policies, programs, and rhetoric support that image. The news focuses on the homeownership crisis: foreclosures, toxic loans, mortgage fraud, the “jingle mail” when homeowners, facing foreclosure, send keys to the lender. The major federal housing initiatives (including the Federal Housing Administration, Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System) have helped more than two-thirds of us buy into the American dream. Indeed, a few years ago policy-makers were lauding the nifty subprime mortgages marketed even to buyers with poor credit, enabling even them to own.

What about renters? One-third of all households rent - surely they are part of the American family; but policies, as well as rhetoric, have overlooked them. While the federal government has subsidized some renters (25 percent of eligible households) and the production of some “affordable” units, those subsidies pale beside the forgone tax revenues from the mortgage interest deduction, property tax deduction, and capital gains exclusion.

It’s not surprising that home values in some neighborhoods of Orinda and Lafayette rose slightly, according to a Contra Costa Times story  that found overall home prices in the East Bay have dropped a lot. What may  be surprising to some people is that parts of Fremont, specifically the Weibel and Vineyards-Avalon neighborhoods,  also saw slight gains from the first to second quarter of 2008.   Over the years,  lots of million-dollar homes have sprung up in Fremont, a place that draws them in part because of the city’s good schools. For example, the median home value $1,276,061 in the second quarter for a home in Fremont’s Vineyard-Avalon neighborhood.  

    Home values in the East Bay eroded at a faster rate during the spring than they did in the early months of 2008, an ominous hint that the housing market has yet to escape from a financial quagmire whose depths remain unplumbed.

During the second quarter of 2008, home values plunged on a year-to-year basis by 25.6 percent in Contra Costa County, and by 18.9 percent in Alameda County, according to a new report released Tuesday by Zillow.com, an online real estate community. The fortunes of East Bay communities varied widely, ranging from a 38 percent decline in part of Antioch to a nearly 2 percent increase in an Oakland hills neighborhood.

Nationwide, second-quarter home values fell by an average of 9.9 percent from the year before.

“There is definitely no bottom yet for prices,” said Dan Hamilton, director of the Santa Barbara-based USCB Economic Forecast Project. “This is not going to improve any time soon, probably not in 2008, anyway.”

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The new housing bill is not just about helping homeowners avoid foreclosure, according to a MarketWatch story. It also significantly raises the amount of cash that can be pulled from reverse mortgages, which could help seniors who are considering this strategy as a way to help supplement living expenses. Keep in mind that any decision about taking out a reverse mortgage requires a lot of research to find out if it’s right for you.

The Housing and Recovery Act of 2008 is going to affect more than first time home buyers, it will affect seniors too.

When the President signed into law a $300 billion housing bill to help homeowners renegotiate their mortgages, reverse mortgage lenders reignited their marketing programs focusing on seniors, says Frank N. Darras, the nation’s leading disability and Long-Term Care insurance lawyer.

Here is what you need to know:

The increasingly popular reverse mortgage has been shopped by lenders and targeted at homeowners over 62. The intrigue of such mortgages has been that as you age, you can have “your house pay you.” The convincing argument is that reverse mortgages can be used to pay for living expenses, prescription drugs, health care, or to pay off an existing mortgage.

Today’s reverse mortgages are called Home Equity Conversion Mortgages (HECMs) and are insured by the Federal Housing Administration. HECMs allows folks to tap home equity and not have to make monthly payments. The HECM has been limited to the value reflected in a home’s appraisal, the range and loan limits recently were between $200,160 and $362,790, depending on the location of the home.

That is going to change. The new bill is intended to significantly increase the amount a borrower can get and lenders are dangling a golden carrot with phrases like “Seniors may be able to borrow as much as $625K in home equity to use any way they please!”

Source: Business wire