SOURCE: Yahoo News

The largest percentage increase in new home construction in over two years was reported for April. This is a rare bit of good news in the housing downturn. Even with the improvement in April, housing construction nationwide was 30.6% below the level of activity a year ago. Applications for building permits are considered a sign of future activity. April recorded an increase of 4.9% up to 978,000 units.

The Commerce Department reported Friday that housing construction rose by 8.2 percent in April to a seasonally adjusted annual rate of 1.03 million units. While apartment construction rose by 36 percent, building in the much larger single-family sector of the market fell by 1.7 percent, the 12th consecutive monthly decline, pushing single-family activity down to a 16-year low.

It is felt that this slump in housing will continue for a number of problems. One of the main difficulties includes banks tightening lending standards. Another is the reluctance of many people to make the commitment of buying a home when prices are still falling. Treasury Secretary Henry Paulson said Friday that he believed financial markets are "considerably calmer" now than they were in March.

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SOURCE: The New York Times

Even with Fannie Mae's recent announcement of quarterly losses investors are still optimistic about the company. The optimism felt is based on the belief that Fannie Mae will be able to pick and choose from the safest loans available in the marketplace. In fact they have also announced that they will raise an additional $6 billion to purchase additional loans.

"As the market recovers, we will be a prime beneficiary," Fannie Mae's president, Daniel C. Mudd, said in a conference call with analysts Tuesday morning. When the housing market finally stabilizes, the company will "feast" on the mortgages it is currently buying, he added. It is partly due to this belief that the stock price for Fannie Mae has increased by 9% up to a close of $30.81.

The Office of Federal Housing Enterprise Oversight also bolstered these sentiments by announcing that Fannie Mae had been released from growth limits that had been put in place in 2006. The capital reserves that Fannie Mae must hold have also been reduced which will allow it to invest more aggressively without having as large a cash cushion.

Both Fannie Mae and Freddie Mac are essential in today's housing marketplace. They buy more than 80% of all home loans made by banks and other lenders. This helps to provide financing for more home mortgages.

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SOURCE: Wall Street Journal Online

A bipartisan provision unveiled Wednesday by Senate leaders would allow companies, including builders, to apply current losses to taxes paid four years ago, instead of the current two-year carry-back. That would help builders in particular because they can apply losses against the big profits they earned during the housing boom.

Some builders feel that the tax benefit will help them by preventing companies from rushing to sell off land at big discounts so that they can apply the losses to profits from two years ago. They feel that these fire sales are helping to drive down the property values and contributing to the number of foreclosures that are taking place. The National Association of Home Builders also said that the carry-back could prevent small builders from going out of business.

This carry-back is being proposed as part of a legislative package which is aimed at the housing market. It may also help other industries like banks and financial-service firms. They may also be able to apply the measure to the losses that they may experience in 2008 and 2009.

One of the most recent examples of builders unloading properties for a huge discount is Centex Corp and their sale of 8500 home sites. These were sold at 30% of their book value which has allowed the company to reap a $294 million tax refund. The carry-back legislation should help to stem this type of contribution to the falling prices.

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SOURCE: Forbes

New York has historically set record prices for some residential properties and the price per square foot and median sales prices have seen new highs. There is a lot of new construction but vacancies are on the rise. Between the various indicators with the loosening market, job losses, and new construction projects adding to an already growing inventory, these all add to the mix when buyers are looking to make a purchase.

"What happens is that people tend to look at prices as a barometer of the health of the market," says Jonathan Miller, president of Miller Samuel, a Manhattan appraisal company. "But it's really how many people are in the market, and what you're seeing now are people dropping out because of affordability or because they can't get credit."

West coast sellers are faring better. Farther north, San Francisco's conforming loan limit jumped from $417,000 to the maximum $729,750, which makes getting credit a simpler affair for many of the city's home buyers.

The main thing to understand is that job growth, new construction, vacancy rates and the ability to get credit are important measures; the key is that when there are more buyers than sellers it should translate into a quicker sale. Even though this may mean a small or little price gain, it's still a sellers market in some areas.

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SOURCE: The Motley Fool

Everyone was buying real estate, even if they couldn't really afford it. These subprime borrowers, who just wanted a home, took advantage of the low-documentation loans that were being offered by mortgage originators. These lenders would then sell off the high risk loans to investment banks that dumped them into pension funds and others that were desperate for high yields.

Not only that, the ratings given by the ratings agencies on the mortgage securitizations, that originated using horribly inaccurate models, convinced investors to buy in. Of course the feds were no help either by allowing the interest rates to stay low for entirely too long. This contributed to the housing bubble which saw housing prices rise by more that 70% over eight years.

In the first quarter of 2006 speculation was truly out of control. Twenty-six percent of loans were of the interest-only or negative amortization variety... The statistics are damning. In 2005 and 2006, 20% of all mortgages were subprime, and a further 12% to 13% were low-documentation Alt-A loans.

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SOURCE: Reuters

Between relief to the Federal Home Loan Bank System as well as Fannie Mae and Freddie Mac, it is hoped that the mortgage markets may begin to stabilize. These changes in the rules and additional money being made available may be able to help dramatically.

Restrictions are being eased for both Fannie Mae and Freddie Mac. This will allow them to take on a larger role in helping to settle the mortgage markets. They will be able to guarantee about $2 trillion in mortgages this year as the Office of Federal Housing and Enterprise Oversight said the restrictions would be relaxed immediately.

The Federal Home Loan Bank System will be allowed to double their mortgage holdings to about $300 billion as more relief may be available to them as well. With these continued influxes of money to the mortgage market, it is hoped that the Fed's attempts to spur on the economy by lowering the overnight interest rates will make a difference to ease financial market stress.

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SOURCE: The Motley Fool

With more and more borrowers walking away from their homes as well as their mortgages, it is even more difficult for housing sales to improve. With lenders generally being highly leveraged, managing a 1-2% default rate is fairly typical. If the default rate increases to 5-6%, it further reduces liquidity in the mortgage market.

If there is a 15% estimated decline in the housing market that will translate into 21% of people with mortgages who owe more than their house is actually worth. If a recession develops and the housing market falls 30%, then nearly two of every five mortgages will be underwater.

There really is only one good thing about this market which is that some stocks are now unbelievably cheap and could have fantastic returns in the next few years. That said, be extremely cautious in this market but keep looking for opportunities that could potentially provide huge gains when the market finally turns.

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