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Profile E-mail Last month's pick-up in home sales -- even as prices kept falling -- has some homeowners wondering if the steep housing slump may be coming to an end. But most housing market watchers say the optimism is premature -- and that this spring will likely be another washout for the residential real estate market. "There is no clear bottom yet," said David Blitzer, chief economist for Standard and Poor's, which tracks home prices. Prices were hardest hit in Miami and Las Vegas, where the index fell nearly 20 percent. Of the 20 cities tracked by the index, 13 posted their biggest drops in two decades. A separate government index showed prices falling 3 percent in January compared to a year ago. That data is derived from a smaller sample of homes with mortgages that conform to the $417,000 limits on loans sold through government housing finance agencies. Falling prices were clearly a factor in the 29 percent gain in existing home sales for February. That uptick has been taken as a sign by some analysts and industry officials that the housing market may be nearing a bottom "I think we're finally beginning to work our way through the seller's denial segment of the market where the sellers are holding up their prices, expecting to get numbers that were unreasonable," said Joel Naroff, chief economist at Commerce Bancorp.
But falling prices are also putting a drag on the broader economy. On top of higher prices for food and gasoline, further home price declines will weigh more heavily on household finances, according to New York University economist Nouriel Roubini. "(Falling home prices) are pushing down the value of homes and putting millions of people underwater," he said. If home prices fall another 10 percent as expected, we're going to see 16 million people with negative equity.
Homeowners with negative equity -- with loans bigger than their house is worth -- are more likely to face a foreclosure or bankruptcy that gets them out from under those loans. That could quicken the already steep pace of foreclosures as mortgages written during the height of the lending boom reset to higher levels. More than a million of the loans are expected to reset this year, putting added pressure on homeowners and worsening the foreclosure outlook. Those foreclosures will put more homes on the market at distressed prices and add to the glut of supply. Last month, there were some 10 months supply of unsold homes available -- more than double 2005 levels. That overhang of unsold homes will further delay a sustainable housing recovery.
com Fact file: Housing help The Hope Now hotline is staffed 24 hours a day, 7 days a week for homeowners who are having trouble keeping up with mortgage payments. The free service helps borrowers contact lenders to try to work out a payment plan or modify their loan. While there are no eligibility guildines, not all callers will be able to negotiate new terms or avoid the sale of their home. Other housing groups and counseling agencies also working with homeowners at risk. Make sure whomever you're dealing with is certified by the Department of Housing and Urban Development or the National Foundation for Credit Counseling.
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