State of the real estate market today

The national mortgage and real estate market headlines last year were overwhelmingly pessimistic, implying that the roof is about to cave in. Many large and small lenders failed, some predictably and others unexpectedly, and several are still struggling to stay afloat. Growing foreclosure anxiety continues to keep the midnight oil burning in many government offices in Washington. Multiple areas that saw spectacular home value increases during the boom years are now gazing unbelievingly at the same curve heading mercilessly south.

Yet, several positive economic factors kept the market from turning outright ugly and it actually could be ready for a cautious rebound. Probably the single most important factor that held things together was the cost of mortgage money. Rates remained low throughout and are still stable. Many homeowners were in a position to refinance their toxic ARMs and other programs into more conservative Fannie Mae and Freddie Mac products and thus avoided missing home loan payments. Otherwise the foreclosure numbers would've been much higher.

It is often overlooked that the once red-hot markets are the ones that now continue to generate most of the scary headlines. The four states hit hardest are Arizona, California, Florida and Nevada and the news generally reflect what is going on in them. But according to the most recent quarterly statistics from the Office of Federal Housing Enterprise Oversight, or OFHEO, home prices were either flat or up in 204 of the 287 metropolitan markets it covered. Large regions of the nation managed to escape altogether the speculator-fueled boom and the subsequent tragedy, but for some reason this reality seldom gets any media coverage. And it certainly should for balance's sake.

The depressing headlines day in and day out certainly helped push the consumer away from the real estate arena. Why purchase a major asset in a down cycle, he would ask? Buyers withdrew in droves to sit on the fence and watch from there what would happen to house values before committing to anything. Things may be changing, though. There now are some indications in several besieged local markets, including Las Vegas, that the cycle may be reaching a turning point. Buyers seem to be realizing the lower prices and affordable mortgage rates may not last much longer, so this could be the right time to act. This is market psychology at work.

When a recovery begins, likely at different times in different locations, it'll in all probability be cautious, slow. Some of the major weaknesses, like mortgage lending and severe overbuilding, will take a while to correct.