Through the last two years, market leaders have said “This is it! We’ve reached bottom!” but they always leave the caveat on the table that “we just don’t know how long the bottom will last - is it V shaped or more like a U?”

The latest report that foreclosure filings have slowed brings new cries of “This is it!” except now we hear the cries as whispers,

But nationwide April foreclosure filings — notice of default, scheduled auction and bank repossession — fell 9 percent from March and 2 percent from a year ago.

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This was the first year-over-year drop since RealtyTrac started tracking annual foreclosure rates in January 2006.

I’ve also heard that a new round of foreclosures are coming, but the newest round is not because of predatory loans, but because of the economy.  Where people lost jobs and consumer confidence dropped, people got in trouble.  In the longer view, with economic indications showing some strengthening (the unemployment rate dropped) so the housing recovery should follow.

What doesn’t kill us only makes us stronger!

Mortgage rates have been creeping up slowly, but are still fairly steady so far this year.  Right now the average mortgage interest rate is 5.07 percent for a conventional 30-year fixed rate loan.  Buyers are getting FHA interest rates at about 5.35 percent, with at least 3.5 percent expected for down payment.

Meanwhile stocks are on the uptick for home builders as we’ve seen a surge in new home sales int he last month.  From a personal level, my view is that we’ll see April as the best month we’ve seen in real estate in two years with home under contract.  Buyers are rushing to beat the deadline of April 30th to be under contract so they can receive the $8000 first-time home buyer tax credit.

In this past week alone, I’ve written three contracts and I’m not a mega seller like other agents.  However, once the deadline passes, it’s fair to say that lenders and real estate agents alike are very concerned about where the market will go next.

We’ve seen it in our local market.  Home sales are on the increase.  Real life multiple offer situations are occurring again (especially on homes priced right and nicely staged), the phones seem to be ringing again, and there are more agents coming in to the office.

We have a cork-board where new listings and new pending sales are posted for other agents to see a snapshot of the market.  At the worst, there would be maybe four or five posted in a two-week period.  From a company that regularly had $4 million in sales each week, taking a full quarter to reach that mark was painful.  Our cork board is filling up again, though, and it’s the same story nationwide.

Unfortunately, forecasters are talking about the “shadow” market that’s about to step out of the outer darkness.   According to NPR,

Shadow inventory comes in several forms. It includes homes in or close to foreclosure but not yet put up for sale — a number that’s increasing. It also includes homes that owners want to sell but are waiting to put on the market until it improves.

In a recent survey, Zillow found that nearly a third of homeowners would have considered putting their homes up for sale if the market were better. Nationally, that would mean between 11 million and 30 million homes that aren’t listed but are waiting on the sidelines.

I still believe the best time to buy may have passed.  With the federal tax credit due to expire in less than two weeks and interest rates creeping up, the very best time to buy may be gone.  However, homes are still very affordable AND compared to double-digit rates of two decades ago, the current rates of 5.1% to 6.0% (depending on the type of loan you get), are still excellent.

The housing market continues to struggle as home prices fall and mortgage applications drop. The Market Composite Index, which measures the volume of mortgage applications each week, dropped this past week. One of the biggest reasons is the fact that the refinancing portion of the index dropped.

Apparently, even though mortgage rates are low, people are reluctant to refinance their homes. This is causing mortgage applications to drop. Perhaps some are waiting to see if mortgage interest rates will drop back below 5%, since mortgage rates rose last week. Another issue is that home values have not been rising, and do get the 80% loan to value ration that many mortgage lenders are asking for is difficult.

Those with mortgages serviced by Fannie Mae or Freddie Mac, though, can take advantage of a refinance program from the government that allows a 125% LTV.

Ever since the financial crisis, Fannie Mae and Freddie Mac have been wards of the federal government, under direct control. This happened when the companies appeared to be on the verge of collapse, and ready to take down a large portion of the mortgage market. With the two GSEs accounting for about 70% of loan originations due to FHA loans, a collapse would have been devastating. Fannie and Freddie are the biggest mortgage lenders in the country, between originations and servicing.

But Barney Frank doesn’t want Fannie Me and Freddie Mac to go back to the way they were before. National Mortgage News Online reports on his opposition:

Chairman Frank said he plans to hold hearings on restructuring the U.S. housing finance system and he has no desire to see Fannie and Freddie return to the former “hybrid” status as a private companies with a public mission.

It is unclear about what might happen going forward, but if Fannie and Freddie are no longer GSEs, they would end up either being completely private, or they would be turned into government home financing programs.

The last of the housing market data is being tallied from 2009, and it looks like things have ended on something of a weak note. Housing starts dropped 4% in December. Multi-family housing starts gained, but that small victory was completely overwhelmed by the fact that single-family housing starts were down so much.

In my mind, it appears that the news illustrates continued stress on families. Demand for multi-family units indicates that there are plenty of families in financial trouble, and even suffering through foreclosure, looking for less expensive housing. Single-family housing starts are above the bottom seen in 2009, but they are far from showing strength. Improvement in this area is likely to be slow, depending on a change in the employment situation.

Until families can afford single housing units gain, housing starts are likely to continue to struggle.

Even as we hear about a recovering economy, the fact of the matter is that there are some places that have higher rates of foreclosure than others. Here is a chart on foreclosure distribution from 2005 to 2009 found at The Mortgage Reports.

You can see the large spike after the financial crisis toward the end of 2008. And it does appear that foreclosures are declining right now. As long as we see something of an improvement in terms of employment and the overall economy, there should be continued declines in the rate of foreclosure.

When we are ready to buy a car, open a credit card, or jump into the big world of making a home purchase, one of the first things that happens is a lender checks our credit score.  Have you paid your bills on time?  Do you have any major dings on your credit like a judgement or unpaid child support?  Is there a foreclosure in your 10-year history or a short-sale in the last five or seven years?

Like regular consumers, builders also have a credit history.   Their credit history is just as important as ours as people again start thinking about buying new construction homes.  Why?  Consider what it would be like to have a contract on a house and then you wait for construction to be completed so you can close prior to the June 30th deadline to get the $8000 first-time home buyer or the $6500 existing homeowner tax credit.  Suddenly, everything stops because the builder’s assets have been frozen because of a credit problem.

There are ways to ensure that you won’t be caught in someone else’s misfortune, according to Ken Kruse, president of Payne Family Homes.  He offers tips on how to be sure your builder is financially sound as you consider a new construction home,

Check third-party resources, such as the Better Business Bureau, which may have a rating on the builder, and Dun & Bradstreet, which may have information on a builder’s credit history. And there’s no harm in asking if the builder has a forward-looking view by investing in more land and more floor plans.

Ask lots of questions of your real estate agent, the workers at the houses (but don’t interfere with their work), and even the other people who live in the neighborhood.  As the economy improves, the sound of hammering, saws, and drilling should return … make sure they don’t suddenly stop on YOUR house by being sure your builder is financially stable in advance.

Labor market issues continue to plague the economy, slowing recovery and prompting a host of issues. One of the concerns is that the continued high unemployment rate could lead to an increase in foreclosures down the road. This is because as people continue to lose their jobs (or fail to find jobs), they are less able to make their housing payments. And this could result in foreclosure.

Real Estate Pro Articles makes a very interesting point about the rather vicious cycle we’re seeing with regard to unemployment and the economy:

A greater amount of consumer and business confidence is an essential factor in any economic recovery; financial recovery hinges on it. We need more than just incentive programs to prop up businesses and consumer spending; we need an increase in confidence in the economy across the board. Only when the public’s confidence is raised will consumers feel comfortable in investing their money in real estate as well as the rest of the economy; unfortunately, the economy will need to look like it is faring better before more consumers show a higher level of confidence in it.

Until the economy improves, employers will be reluctant to hire. However, the economy can’t improve until employers hire more people, boosting their ability to spend and make mortgage payments. It’s rather circular. But it’s the way things are right now. So it will be interesting to see how things proceed from here.

After taking a bit of a break for the holidays, it appears that mortgage applications are on the rise again. As one might expect, refinancing is in the lead again. But home purchase applications have risen as well, reports MarketWatch:

Refinancing applications jumped 21.8% in the week ended Jan. 8 compared with the week before, which was shortened for the New Year’s holiday. Applications for mortgages to purchase homes rose a seasonally adjusted 0.8% on a week-to-week basis.

With the home buyer tax credit extended and expanded, it is no surprise that people are starting to consider buying homes again. Of course, some of these mortgage applications will be rejected, without good credit scores, but the increase in applications is heartening for the housing market.

And, of course, it makes sense that refinancing applications are on the rise. With mortgage rates still hovering near historical lows, it is natural that home owners want to take advantage. When you refinance to a lower interest rate, it is possible to save thousands of dollars on your home loan.