La Jolla, CA---Southland home sales saw their biggest year-over-year drop in more than two years last month as the market lost most of the boost from the federal home buyer tax credits. The median sale price dipped for the second month in a row, the result of a shaky economic recovery, continued uncertainty about jobs, and the expiring tax breaks, a real estate information service reported.

A total of 18,946 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in July. That was down 20.6 percent from 23,871 in June, and down 21.4 percent from 24,104 for July 2009, according to MDA DataQuick of San Diego.

This was the slowest July since 2007, when 17,867 homes were sold, and the second-slowest since July 1995, when 16,225 sold. Last month’s sales were 27.4 percent lower than the July average of 26,085 sales since 1988, when DataQuick’s statistics begin. The average change in sales between June and July is a 6.7 percent decline – about one-third the drop seen this year.

Last month’s 21.4 percent sales drop from a year ago marked the steepest year-over-year decline for Southland sales since March 2008, when sales fell 41.4 percent.

“It appears some of the sales that normally would have occurred in July were instead tugged into June or even May as buyers tried to take advantage of the expiring tax credits. Some of last month’s underlying technical numbers were largely flat, indicating that the market is treading water,” said John Walsh, MDA DataQuick president.

“We do expect some sideways buying and selling to kick in, especially among homeowners who have owned for more than seven years and didn’t take out equity during the frenzy. You may have to ‘discount’ your self-perceived home value, but if the person you’re buying from has to do the same thing, it doesn’t matter. And you may get a spectacularly low mortgage rate.”

The median price paid for a Southland home was $295,000 last month. That was down 1.7 percent from $300,000 in June, and up 10.1 percent from $268,000 for July 2009. The low point of the current cycle was $247,000 in April 2009, while the high point was $505,000 in mid 2007. The median’s peak-to-trough drop was due to a decline in home values as well as a shift in sales toward low-cost homes, especially foreclosures.

Foreclosure resales accounted for 34.2 percent of the resale market last month, up from 32.8 percent in June but down from 43.4 percent a year ago. The all-time high was February 2009 at 56.7 percent, DataQuick reported.

Government-insured FHA loans, a popular choice among first-time buyers, accounted for 36.0 percent of all mortgages used to purchase homes in July, down from 38.8 percent in June and 39.2 percent in July 2009.

Last month 21.9 percent of all sales were for $500,000 or more, compared with 21.6 percent in June and 19.2 percent a year ago. The low point for $500,000-plus sales was in February 2009, when 13.6 percent of sales crossed that threshold. Over the past decade, a monthly average of 25.4 percent of homes sold for $500,000 or more.

Viewed a different way, Southland zip codes in the top one-third of the housing market, based on historical prices, accounted for 30.8 percent of existing single-family house sales last month, up from 30.4 percent in June and 27.7 percent a year ago. Over the last decade those higher-end areas have contributed a monthly average of 33.3 percent of regional sales. Their contribution to overall sales hit a low of 21.0 percent in January 2009.

High-end sales would be stronger if adjustable-rate mortgages (ARMs) and “jumbo” loans were easier to obtain. Both have become much more difficult to get since the credit crunch hit three years ago.

Last month ARMs represented 6.1 percent of all purchase loans, down from 6.7 percent in June but up from 3.4 percent in July 2009. Over the past decade, a monthly average of nearly 40 percent of all home purchase loans have been ARMs.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 18.4 percent of last month’s purchase lending, up from 17.6 percent in June and from 15.2 percent in July 2009. Last month’s figure was the highest since January 2008, when it was 18.7 percent. Before the August 2007 credit crisis, jumbos accounted for 40 percent of the market.

Absentee buyers – mostly investors and some second-home purchasers – bought 21.9 percent of the homes sold in July, paying a median of $220,000. Buyers who appeared to have paid all cash – meaning there was no indication that a corresponding purchase loan was recorded – accounted for 26.7 percent of July sales, paying a median $218,250. In February this year cash sales peaked at 30.1 percent. The 22-year monthly average for Southland homes purchased with cash is 14.2 percent.

The “flipping” of homes has trended higher over the past year. Last month the percentage of Southland homes flipped – bought and re-sold – within a six-month period was 3.7 percent, while in June it was 3.4 percent and a year ago it was 2.0 percent. Last month flipping varied from as little as 2.8 percent in Orange County to as much as 4.4 percent in Los Angeles County.

MDA DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $1,204 last month, down from $1,251 in June, and up from $1,180 in July 2009. Adjusted for inflation, current payments are 46.4 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They were 56.1 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains high by historical standards but is lower than peak levels reached over the last two years. Financing with multiple mortgages is low, down payment sizes are stable, and non-owner occupied buying is above-average, MDA DataQuick reported.

Source: DQNews.com Media calls: Andrew LePage (916) 456-7157

Copyright 2010 DataQuick Information Systems. All rights reserved.

Nationally, sales of previously owned homes plunged 25.5% from July 2009—numbers the National Association of Realtors said had not been so low since 1999. Single-family home sales were at their lowest since May 1995, during the last housing bust.

Wall Street took the announcement by the Realtors’ association badly, and at the close of the trading day, the Dow was down 133.96 points.

“We knew that there would be payback for the government’s incentives but we didn’t think it would be so bad,” said Joel L. Naroff, of Naroff Economic Advisors in Holland, Pa.

The end of the tax credit “hit with full force” in July, said economist Nigel Gault, of IHS Global Insight in Lexington, Mass. “The most worrying feature of the recent housing data is the absence of evidence of any underlying improvement in sales,” Gault said. “All of the action earlier this year appears to have been driven by the tax credit. Mortgage applications for purchase have been moving sideways since June, even as 30-year mortgage rates have headed into the low 4s.” A sustained housing upturn “will depend on an improvement in the jobs market, which at the moment is slowing down rather than gathering pace,” he said.

Realtors’ association economist Lawrence Yun acknowledged the downturn, but also offered perspective.

“Since May, after the April 30 deadline, contract signings have been notably lower,” he said, “and a pause period for home sales is likely to last through September.”

Still, Yun said, annual sales are expected to reach five million in 2010 because of the healthy activity in the first half of the year. “To place that in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years.”

Thanks to the tax credit, home values have been stable for 18 months, Yun said.

In July, the nation’s median price rose 0.7% over July 2009, to $182,600. The median is the middle value; half the homes sold for more, half for less.

Yun insisted that record-low mortgage interest rates, now averaging 4.5% would encourage the wary to get back into the hunt.

In fact, rate-conscious buyers are just about the only ones in the market these days. They waited for rates to dip even further, more eager to save thousands over the life of their mortgages than to snag a one-time tax credit available only to qualified buyers.

Michelle Nnolum recently closed on her first home, a condo purchased for $195,500 with a $5,500 seller’s assist at Chanticleer in Cherry Hill, N.J. She signed the agreement of sale in July. “I never thought I could qualify to buy, but I kept hearing about these low rates,” said Nnolum, whose home-based business, ClassiFit, does custom alterations of gowns and evening wear.

She looked at four houses for sale with her agent, Giovanni Judenic of Long & Foster, before settling on a completely renovated two-bedroom, 2 1/2-bath condo that had been on the market for just three days.

Her rate: With a 20% down payment, 4.75%. But thanks to a “buydown” incentive from the mortgage broker, she will pay 3.75% for the first year, “which equals what I was paying for rent,” she said.

“I think values will go up,” said Nnolum. “With 20 percent down, I’ve started with a lot of equity already.”

Chris Bolli of Bristol, Pa., is equally interest-rate-conscious as he searches for a house.

A Navy veteran who sells prosthetic devices to area hospitals, first-time buyer Bolli has been looking for a three-bedroom, two-bath house with a garage for six months.

“Buying a house is a long-term investment, and finding the lowest fixed rate over 30 years is more important than $8,000 up front,” he said. “I wasn’t going to be pressured into buying something.”

One problem with his search has been that “sellers haven’t caught up yet with the realities of the market,” said Bolli, who considers $250,000 the middle of his price range.

“We looked at a house in an area where renovated houses were selling for $270,000, but the owner, who bought at the height of the market, wanted $380,000 for a house with 1950s fixtures,” Bolli said. “It wasn’t worth it.”

Anthony Sanders, professor of real estate finance at George Mason University in Virginia, said many sellers were “holding on to their overpriced housing, hoping that they won’t get damaged even further. There’s been a change in consumer psychology, and it’s difficult to reverse.”

Naroff, who recommends waiting until the fall before making judgments, said that “unless households and businesses have confidence about the future, they are not going to buy homes or invest, regardless of the interest rate.”

Housing’s double dip should not cause a double dip in the broader economy, said Mark Zandi, chief economist at Moody’s Analytics.

“The recent weakness in housing won’t be severe or long enough to undermine the rest of the economy,” Zandi said. “It will be close, however, and it will be very uncomfortable through the remainder of the year. Nothing works all that well in the economy when housing is struggling.”

(c) 2010, The Philadelphia Inquirer.

Distributed by McClatchy-Tribune Information Services.

RISMEDIA, August 17, 2010—Real estate professionals nationwide are calling 2010 “the year of the short sale,” where homeowners who owe more on their properties than what they are worth sell at deeply discounted prices—with the blessing of their lender.

Here is how to go about successfully buying a short sale:

1. Search for short sale properties
Most short sales are listed by real estate agents. You will find these listings on local websites and in MLS feeds. Some lenders have complained about advertising that identifies the home as a short sale, because the lenders feel it puts them at a disadvantage when it comes to home pricing. This is accurate, as buyers generally offer less when the property is advertised as a short sale.

Read the listing carefully. Agents slip in words that identify the listing as a short sale. Look for the following terms:

• Subject to bank approval
• Pre-foreclosure
• Notice of Default
• Give the bank time to respond
• Preapproved by bank
• Headed for auction

2. Select a real estate professional
Professionals with short sale experience can help you navigate the short sales process in your local market. The buying process is often far more complex—and far longer than typical sales–so a trained ally on your side can make your experience successful.

3. Investigate the mortgage and liens on the property
Here’s where a good short sale real estate agent is worth his or her weight in gold. Uncover how much the mortgage is worth. Find out how much the current owners paid and when. Find out how many liens are on the property. Find out which lender is the primary lien holder. Research comparable sales in the area.

4. Have a home inspection
Short sales are typically sold “as is,” with no contingencies allowed. That short sale is no bargain if you discover—after the closing—that it requires major, unexpected repairs. A thorough home inspection will provide a clear view of the home’s condition, allowing you to make educated decisions on whether or not to purchase.

5. Write a complete offer
Remember, the lender—not the owner selling the property—is calling the shots and decides whether your offer will be accepted, rejected or countered. Helping the lender, whose agents may be overloaded with a glut of short sales, fully understand the financial picture will support your bid. Include the following materials with any short sale offer:

• Cover letter
• Signed owner/borrower short sale purchase agreement
• Seller hardship letter
• Seller payroll stubs
• Two years of seller tax returns
• Market comparables
• HUD-1 closing net sheet
• Repair cost estimate
• Pictures of property

6. Negotiate
Like any real estate transaction, successful negotiation is required to strike a deal. If the lender rejects or counters your written offer, you’ll have to negotiate with the lender by making a higher offer. Be prepared to offer more money to close the deal, or to walk away if it doesn’t make financial sense.

7. Be Patient
Short sales, which have increased in volume and frequency, are overloading some lenders. Be aware that processing and decision-making times for some lenders can be quite long—up to a year or more. Decide if you have flexibility in your timing, and if so, know that you may be waiting for awhile.

Dan Steward is president of Pillar To Post Home Inspection.

For more information, visit www.pillartopost.com

Refinancing Accounts for 80% of Loan Activity over Last 2 Months: Nothaft

Over the last two months, refinancing activity has accounted for more than 80% of all conventional loan activity, said Frank Nothaft, chief economist at Freddie Mac.

In a Featured Perspectives report out Monday, Nothaft said Freddie Mac and Fannie Mae have purchased 1.4m refinance loans, including nearly 200,000 loans that have gone through the Home Affordable Refinance Program (HARP).

According to Nothaft, these homeowners trimmed an average one-percentage point from their interest rate. The refinanced mortgage payments have been reduced by more than $2.5bn over the first year of those new loans.

"By increasing the amount of disposable cash available for savings or consumption purposes, the ability to refinance provides a direct boost to household finances," Nothaft said.

The US Department of Housing and Urban Development (HUD) will launch the FHA Short Refinancing program Sept. 7 in the hopes of getting more borrowers out of negative equity. But there are some secondary limitations, including one on the servicers that are trying to get clearance from investors to write down current loans. Borrowers have to be current to qualify for the program.

But most refinancing and traditional loans are being funded through Fannie and Freddie. Three out of every five single-family loans were financed directly by the two companies, Nothaft said.

He added that economic growth is "likely to continue" for the rest of the year, and said there was a possible uptick in the unemployment rate to come. As for housing markets, local ones are at or near bottom, he said, with some already showing signs of improvement.

"And 2011 is likely to bring better prospects for sales, construction and home values, with financing continuing to be supported by Freddie Mac, Fannie Mae, and Ginnie Mae," Nothaft said.

After the tax credit induced "mini-boom" in the spring, home prices should remained pressured through the end of the year, according to the real estate data provider Altos Research.

The average national house price was $474,946 in July, according to the Altos 10-city composite price index. The index fell "significantly" from its high in the summer of last year, when buyers were taking advantage of the homebuyer tax credit. It has declined for the past 11 months. The tax credit expired in April.

It's a 0.63% decrease from June but up 0.66% over the last three months. Asking prices for homes fell in 19 of the 26 markets tracked. The biggest declines came in Phoenix at 5.1%, Washington, D.C. at 4.1%, and Miami at 3.3%.

While demand is dropping, supply is going up, according to Altos. According to the 10-city composite, there were 311,742 houses in inventory in July, up 2.2% from the previous month and up 3.8% over the last three.

Altos measured increases in 22 of the 26 markets. In Washington, D.C., inventories increased 5.6% in July from the previous month, the largest increase in the country.

"The market, right now, is a veritable case study of the law of supply and demand," according to the report. "Right now, there's a whole lot of supply, but very, very little demand. The buyers that drove a flurry of activity during the spring have left a deafening silence in their wake."

According to the report, even through mortgage rates stay at all-time lows, buyers aren't being swayed, which means these supply and demand trends should continue through the rest of 2010.

"Increases in inventory nationwide show that demand simply isn't there. As the market continues to correct itself, and as we head into the seasonally weak fall and winter months, expect more increases in inventory, and likely deepening declines in asking prices," according to the report.

Secondary limitations on servicers that will participate in the recently announced Federal Housing Administration (FHA) Short Refinancing program could limit the amount of mortgages that receive the write-down.

In particular, Credit Suisse analysts noted today that the program will be limited in its reach among mortgages owned or guaranteed by government-sponsored enterprises (GSEs).

The program, announced by the US Department of Housing and Urban Development (HUD) last week, would provide additional refinancing options to underwater homeowners starting Sept. 7.

According to HUD, to be eligible for the new loan through the program, the homeowner must be underwater but still current on the mortgage. A credit score of 500 or better is required, and once refinanced and insured by the FHA, the new refinanced loan must have a loan-to-value ratio of no more than 97.75%.

The borrower's existing first-lien holder must agree to write at least 10% of the unpaid principal balance, and it must bring the borrower's combined loan-to-value ratio on the new loan plus any junior mortgages to no more than 115%.

So, in order to qualify, the borrower must be underwater but still making current monthly payments. But in order for a servicer to write the mortgage down, it has to achieve "safe harbor" with the investor in order to avoid future litigation. This means proving the borrower is in imminent default. A spokesperson for the Mortgage Bankers Association (MBA) confirmed this to HousingWire but could not provide an estimate on the amount of loans that would be eligible for the program.

JPMorgan analysts said 1.1m mortgages could be eligible for the program but admitted there would be difficulties in accurately predicting which loans should get the write down. Other analysts are predicting low numbers of eligible borrowers. Amherst Securities said "relatively few" would be eligible due to debt-to-income restraints and the fact that it’s a volunteer program.

Loans backed by the GSEs Fannie Mae and Freddie Mac are "unlikely" to be written down through the recently announced FHA Short Refinancing program, according to a report from Credit Suisse.

"First, refinancing a GSE loan into FHA does not reduce risk to the government," according to the report. "On the contrary, it potentially creates incremental losses from the upfront principal write-down on refinanced mortgages, some of which might not default under the status quo."

Also, Credit Suisse analysts believe the GSEs would prefer retaining control of the loans, and, according to them, Fannie and Freddie do not use principal write-down as part of the loss mitigation waterfall, and would likely not participate in the program.

Fannie Mae did not have a comment, and Freddie Mac did not immediately respond to requests for one.

Non-agency loans will "likely be limited," too, according to the report, and the program already prohibits FHA-backed loans. According to Credit Suisse, 7% of outstanding non-agency loans would qualify.

Despite more administrative problems due to restricted coordination between first and second-lien holders, Credit Suisse analysts believe the program stands a better chance of success in the whole-loan space.

Bank of America is launching a new cooperative short sale program that will target 2,000 pre-screened homeowners, said Matt Vernon, the REO and short sale executive at BofA.

Completed short sales were at their highest reported level in May, with Freddie completing 3,000 — level with the previous month — and Fannie completing 7,000 — up from 6,000 in April. These high levels of short sales, along with a jump in modifications, drove many of the completed foreclosure prevention actions in May.

The GSEs completed 66,000 loan modifications in May, up from 47,000 in April. Forbearance plans remained unchanged at 7,000 in the month. Repayment plans declined to 13,000, from 18,000 in April.

Although completed loan modifications increased substantially in May, the cumulative volume of Home Affordable Modification Program (HAMP) permanent mods declined for the second consecutive month, due to canceled three-month trial plans:

The monthly volume of Home Affordable Refinance Program (HARP) workouts also fell in May along with overall refinance volume:

The GSEs completed 200,869 total refinancings in May — 1.15m so far in all of 2010. They completed 26,780 HARP refinancings for loan-to-value (LTV) ratios between 80% and 105%. They also completed 1,881 HARP refinancings for LTVs between 105% and 125%.

While short sales and modifications drove workout efforts — despite falling HAMP and HARP numbers — 60-plus-day delinquency rates declined slightly in May. The 60-day delinquency rate among borrowers with an original credit score below 660 declined to 14.8%, from 14.9% in April, FHFA said. The rate among those with original credit scores above 660 remained low, at 4% in May.

Write to Diana Golobay.

KC Fed chief Thomas Hoenig has voted against his colleagues at the last five meetings. He continues to contend the zero interest-rate policy is no longer necessary, inhibits the committee's ability to adjust policy when needed, and eventually may lead to inflation.

In his dissent, Hoenig also said he doesn't think reinvesting maturing mortgage-backed securities funds into Treasurys to maintain balance sheet levels helps support "a return to the committee's policy objective."

In a townhall meeting on Friday in Lincoln, Neb., Hoenig said employing the ZIRP "during a crisis is understandable, but a zero rate after a year of recovery gives legitimacy to questions about the sustainability of the recovery and adds to uncertainty."

The federal funds rate was lowered to between 0% and 0.25% in December 2008.

Hoenig said the current economic malaise was caused by low rates that contributed to excessive debt and leverage among consumers, businesses and government, and the economy now is improving and growing at a rate faster than the last two recoveries.

"We need to get off of the emergency rate of zero, move rates up slowly and deliberately," Hoenig said. "This will align more closely with the economy’s slow, deliberate recovery so that policy does not lag the recovery."

He said Friday that success for the recently passed Dodd-Frank Act "entirely depends on how well regulatory authorities implement the new requirements."

National home prices rose in June from the same time in 2009, marking the fifth consecutive month of year-over-year increases, according to the latest report from real estate services and data provider CoreLogic (CLGX: 18.68 +0.05%).

National prices, including distressed sales, rose by 1.4% in June from a year earlier. The yearly appreciation slowed from the 3.7% increase in May from one year earlier. The May increase was revised up from the initial 2.9% estimate.

"Home price volatility and collateral risk remain very high," said CoreLogic chief economist Mark Fleming. "The stabilization phase and policy intervention since the spring of 2009 has run its course. Prices are expected to further moderately decline as the economy remains weak through the fall."

CoreLogic called the 2.3 percentage point deceleration from May "very large by historical standards," with deceleration most pronounced in more expensive and distressed housing markets.

Excluding distressed sales, prices rose 0.2% in June from one year earlier.

For answers to your questions about selling your home in today's market, contact Teri Pacitto, Broker Associate  DRE#00997649 for Ventura and Los Angeles Counties.     805-444-7013

By Tiffany Hsu, Los Angeles Times

August 11, 2010

Copyright © 2010, Los Angeles Times

Real estate professionals are contending with a bearish housing market following the expiration of the federal homebuyer tax credits, according to a webcast [2] by real estate data company Altos Research [3].

In a previous webcast [4] at the end of the first quarter, the company pointed out that the market wasn't seeing the usual springtime bounce in home prices in March compared to last year and inventory was rising at a worrying pace -- signaling that the beginning of 2011 could look a lot like 2009.

After the second quarter and into the third, the company said the housing market is worse than most real estate professionals might think.

"Spring housing prices already hit peak in July and are trending down. Inventory is climbing and climbing pretty quickly," said Scott Sambucci, the company's vice president of data analytics.

Raw inventory in Altos' 20-city composite, which includes the same 20 cities in the Case-Shiller Home Price Index, was rising past 575,000 units at the end of July -- a figure not seen since January 2009. At the same time, median home prices had peaked under $380,000 and were down to about $369,000 at the end of last month, with no signs of abating.

At the end of July, 38 percent of homes in the 20-city composite had seen their prices reduced, indicating what Sambucci called a "moderately weak" market.

The Minneapolis-St. Paul metropolitan area was seeing the largest share of homes with price reductions, at 49 percent, while the Las Vegas-Paradise metro area had the lowest share, at 26.5 percent. Perhaps demonstrating that conditions in Las Vegas had bottomed out and were improving, that metro area experienced a 34.1 percent year-over-year reduction in homes at discounted prices.

Sambucci called the interaction between prices and inventory the "supply effect."

"More supply means lower prices. With the initial stimulus, sellers started to see higher demand, and less of a need to drop prices, but (now there is a higher share of price reductions) in consequence of higher inventory counts," he said.

"Demand has already been pushed forward because of the stimulus," he added.

When the federal homebuyer tax credits were initially implemented in early 2009, home-sale transactions in the middle of the year were effectively stable, but the extension of the tax credits at the end of November had a limited effect, according to Altos' data.

Listings absorbed, as measured by activity in the previous 90 days, fell to the lowest level in at least two years around February of this year, to 27,500, and then rose somewhat, to 32,500, around the time of the tax credit deadline in April. Comparatively, the market had absorbed 47,500 listings around November of 2007.

After the expiration of the homebuyer tax credits, transactions began falling immediately and were down to around 30,000 at the end of July.

The company recommended real estate professionals obtain very local data to indicate how their market is doing, however.

"Despite general bearishness, some markets are resilient to climbing inventory levels," Sambucci said, citing Birmingham, Ala., and Pittsburg, Pa., as examples.

"If you don't know what's going on locally, you're probably leaving money on the table when it comes to your real estate events or real estate transactions," Sambucci said.

A separate report [5] by online brokerage ZipRealty found that almost half of homes for sale had their prices cut in July in a sample group of markets. Among 26 markets nationwide tracked for the report, 45.8 percent of homes for sale had had their listing price slashed at least once last month, up 2.7 percent from June [6] and up 3.4 percent from July 2009.

"Homebuyers this summer have been on the sidelines, waiting to find deals and bargains; so we're seeing more sellers slashing their list prices to entice these home shoppers to make an offer," said Leslie Tyler, ZipRealty's vice president of marketing, in a statement.

The median discount was $18,949, a slight 0.6 percent decrease from June, but a 26.7 percent decrease from July 2009, when the median discount was $25,846. The median listing price in July fell 2 percent month-to-month and 5.4 percent year-over-year, to $254,987. The average number of reductions per listing was 1.99 --  flat from last July and up 1.7 percent from June.

The top 10 metro areas with the highest share of price-reduced listings (percentage of discounted listings; median discount among 26 study markets)

1. Jacksonville: 54 percent share of price-reduced listings; $19,000 median discount

2. Phoenix: 52.7 percent; $16,000

3. Minneapolis-St. Paul: 51.1 percent; $17,000

4. Orlando: 50.7 percent; $20,100

5. Austin: 50.3 percent; $13,000

6. Chicago: 50.2 percent; $20,000

7. Tucson: 49.1 percent; $16,760

8. Salt Lake City: 48.8 percent; $15,000

9. Baltimore: 48.7 percent; $18,000

10. Seattle: 47.6 percent; $23,900

The top 10 metro areas with the lowest share of price-reduced listings

1. Denver: 32.5 percent; $13,100

2. Los Angeles: 39.4 percent; $28,764

3. San Francisco: 40.9 percent; $38,000

4. Miami-Ft. Lauderdale-Palm Beach: 41.2 percent; $27,100

5. Richmond, Va.: 43 percent; $12,050

6. San Diego: 43.4 percent; $31,000

7. Las Vegas: 44 percent; $15,000

8. Norfolk-Virginia Beach: 44 percent; $15,000

9. Houston: 44.3 percent; $10,000

10. Charlotte: 44.4 percent; $13,000

(Source: ZipRealty)

By Venessa Wong  

At some point, everything stops falling. Sometimes things hit bottom with a bone-crunching thud and just lie there in a heap. Sometimes they bounce back up at least part of the way. The U.S. housing market is in the latter camp.  

While it's unlikely that U.S. home prices will return at any time soon to the highs of the bubble years, some local markets are showing resiliency. Even more encouraging, the forecast in numerous regions across the country is for a healthy recovery by 2014.  

While four years may seem too distant to offer many U.S. homeowners much reassurance, the outlook could be worse. Taking into consideration such factors as employment, foreclosure rates, income growth, demographic trends, and construction costs, Moody's Economy.com and Brookfield (Wisc.)-based financial services industry information firm Fiserv (FISV) estimate that by 2014, U.S. home prices will be 7.2 percent above 2010 levels, with the strongest growth in the Pacific Northwest.  

In the short term, the waning impact of the first-time homebuyer tax credit and increasing foreclosure activity will keep the housing market anemic in most places. Fiserv and Moody's expect U.S. home prices to decline a further 4 percent before reaching a trough early next year, by which time prices will have fallen 32.9 percent from the peak levels of 2006.  

promising gains—as some markets drop

"Prices have been falling for four to five years now," says David Stiff, Fiserv's chief economist. "Hopefully the labor market will be making more steady improvements by next year."  

Already housing has shown some subtle signs of stabilization. In the first quarter, U.S. single-family home prices rose an average of 2 percent year-on-year—the first national gain since 2006—according to the Fiserv Case-Shiller Indexes. The trend is promising, with the increase driven by homebuyer tax credits and gains in such traditionally strong markets as San Francisco and Washington, D.C. says Fiserv. Still, prices in already battered markets continued to fall: Detroit, Las Vegas, and many Florida markets experienced double-digit drops.  

Stiff says he expects to see home prices bounce up and down near their lows for the next two to three years, especially in the markets that experienced the largest price bubbles.  

The most robust market in the forecast is Washington State's Bremerton-Silverdale area, a quiet naval community across the Puget Sound from Seattle. Home sales and new construction in the area have slowed in 2010, but Fiserv and Moody's Economy.com expect prices there to shoot up by a total of 44.7 percent over the next four years—9.7 percent annually—the highest forecast among 384 metropolitan statistical areas surveyed nationwide. Price levels have fallen about 21 percent from 2007 peak levels, according to the Fiserv Case-Shiller Indexes.  

Bremerton-Silverdale: Less distress

One factor setting Bremerton-Silverdale apart has been a stronger economy than the rest of the U.S., says Stiff. The unemployment rate in the area is 7.2 percent, compared to 9.5 percent nationally, according to June data from the U.S. Bureau of Labor Statistics. Bremerton's military demographic has helped to sustain employment. The Naval Base Kitsap and the Puget Sound Naval Shipyard provide numerous local jobs, says Ken LeMay, a real estate broker in Kitsap County, which includes the Bremerton-Silverdale area.  

Stiff adds that while the area has a large number of foreclosure and pre-foreclosure homes, the market is less dominated by distressed sales than many other markets. In May, foreclosure resales made up about 12 percent of sales in Bremerton, compared to 19 percent in the U.S. as a whole, according to Zillow.com.  

Matthew Gardner, an economist and principal with Gardner Economics in Seattle, states in a first-quarter report about the western Washington real estate market: "I believe that a bottom is being formed relative to house values and that unless we see a massive flood of distressed houses coming to the market (which is, in my opinion, unlikely), we should see continued stability and ultimately, growth in values in our region."  

While Silverdale and Bremerton are doing far better than many other communities, LeMay says construction has slowed so much that the county building department is now open Monday through Thursday—as opposed to every weekday when the market was more active. Any increase in price will simply depend on supply and demand, he says.  

would such fast growth be unhealthy?

While most maintain a cautious attitude about the rebound, some predict undersupply in a few years. Celia Chen, a senior director of housing economics at Moody's, recently told SmartMoney.com that such states as Washington, Oregon, New Mexico, and Utah—where supply and demand are now in balance—are most likely to be undersupplied by mid-2012.  

Mike Pitts, owner and general manager of Windermere Real Estate in Silverdale, says the 44.7 percent four-year growth forecast for Bremerton-Silverdale is hopeful, but might also be problematic. "I don't know if it's healthy to grow that fast in a short period of time," he says.  

These forecasts may sound alarming—if not impossible—to some, but Fiserv's Stiff says: "The risk of another bubble is pretty low." Compared to the rate of appreciation during the housing boom, which was as high as 50 percent annually in some areas, the forecasted rates are reasonable, he says. "It's a reaction to prices being so low, and appreciation will be low after that."  

Some hard-hit markets will remain depressed for a while. The outlooks for Miami, Naples, Fla., and Atlantic City, N.J., are the nation's weakest, with prices expected to drop by 14.8 percent, 13.7 percent, and 12.1 percent, respectively, over the next four years.  

alternating optimism and pessimism

A year ago, Stiff predicted that the market would reach its trough by the end of 2010. By some measures the recovery is lagging. "What changed that was first time homebuyer tax credit," he says. "It created a temporary increase in prices, so we're expecting a [moderate] double dip."  

He expects sales and prices to bump along the bottom as buyers try to jump into the market at the lowest point. This will result in alternating bouts of optimism and pessimism regarding the housing market's recovery. There is added confusion because some areas hit bottom earlier and the timing of corrections is not the same across all regions. The fluctuations will make it difficult to know exactly when the housing market has reached its trough.  

Perception is key, LeMay says: Buyers are waiting for prices to reach bottom. In many markets, next year might reveal valuable opportunities.  

Click here to see where housing is forecast to rebound the most by 2014.  

Wong is a lifestyle and real estate reporter for Bloomberg Businessweek.  

Biggest home price increase projected in 2014: Napa metro

Forecast 4-year price increase: 31.7 percent
Current median price: $355,000
Prices to reach trough in: 2010 Q4
Median family income: $79,600
Population: 134,650

Prices in the Napa area have dropped an enormous 44.6 percent since peaking in early 2006, according to first-quarter 2010 data from Fiserv and Moody’s Economy.com. Despite the drop, home prices are expected to rebound quickly. According to an article in the St. Helena Star, Napa County is vulnerable to economic and real estate market fluctuations, but the impact is mitigated by managed growth and the county’s natural and agricultural resources. The unemployment rate in the Napa area fell to 9.3 percent in June, from 11.1 percent in January, according to the BLS.

Index used to calculate historical home price changes: Case-Shiller