Bill Schramm and Bethany Siwicki scoured property listings for three months before agreeing to see a home in Round Lake Beach, even though its online pictures didn’t look promising.

“It looked like a piñata blew up in there,” Schramm said. Every room was a different color, and the only way to tell the carpet once had been white was looking at the furniture marks.

But the home they visited bore little resemblance to the pictures. The walls were white, new carpet had been installed, and repairs made. The recently engaged couple immediately submitted an offer and are waiting to close on their first home purchase.

Sprucing up a home to sell it faster and for more money is a strategy frequently advocated by real estate agents. In this case, though, the seller is Wells Fargo Bank, and the home Schramm and Siwicki are buying is a foreclosure.

There are still plenty of dilapidated foreclosures on the market marred by water damage, mold, broken windows and missing plumbing fixtures, properties that hold little appeal except to investors and professional rehabbers.

But as the quality of foreclosures and the communities where they are located has improved, so, too, has interest in them by consumers. To entice those buyers and lessen their inventory of real estate owned foreclosed homes, commonly known as REOs, banks are spending thousands of dollars on some foreclosures. In addition to new paint and carpet, floors are being refinished, old windows are being replaced, and leaky roofs are being repaired.

The strategy benefits the banks and home buyers, who otherwise would have trouble securing mortgages on homes that a lender could term “uninhabitable” because of needed repairs. At the same time, it helps the broader real estate market because while the foreclosures still sell at a discount, it is not at the fire sale prices of unlivable properties.

For traditional home sellers, the trend of banks plowing money into foreclosures means they will have to be more realistic in their pricing, because the foreclosure for sale down the street may look a lot more inviting to prospective buyers.

“Foreclosures used to be fewer and far between,” said Ray Millington, an agent at Century 21 Roberts & Andrews. “The problem is, we say we’ll concede that sale, but what happens when another one pops up. It becomes an ongoing thing. It’s not like you have only one in the subdivision anymore.”

Real estate agents say they are having the same conversation with banks that they have with any seller, and it starts by identifying the target customer for a property. If the answer is an owner-occupant, agents recommend fixes that can range from a few thousand dollars of paint to $25,000 of kitchen upgrades. In the past, banks rejected such suggestions, viewing them as throwing good money after bad, but now some are heeding the advice.

Last month within the city of Chicago, 207 of the 472 single-family detached homes that sold were foreclosed properties. An additional 62 were short sales, transactions in which the homeowner sells the home, with the lender’s permission, for less than the amount owed on the mortgage. Combined, distressed properties in February accounted for 57% of all single-family detached sales and 46% of all condos, according to the Chicago Association of REALTORS®.

Fannie Mae repossessed more than 262,000 single-family homes nationally last year, and as of Dec. 31, its inventory of single-family REOs was almost 163,000.

Under its “first look” program that began in September 2009, Fannie Mae will only consider offers from owner-occupants or buyers like nonprofits during the first 15 days a home is on the market. Fannie sold nearly 29,000 homes to consumers under that program during its first year.

Buyers are jumping on the best REOs, and keen interest can lead to multiple offers. “The ones that are in good shape, people are snapping those up,” said Mike Stodola, an agent at Koenig & Strey Real Living. “The ones that are left are ones that need major work.”

Despite about $30,000 in improvements, the house Schramm and Siwicki will buy for $125,000 still needs work. The couple’s first project is to remodel the kitchen. “It’s probably the most hideous livable house you’ll see, but I can fix it,” Schramm said. “Nothing even comes close to this house in terms of value per dollar. There’s a ton of houses out there that cost less than $125,000. Do I want to buy them and move into them? No.”

It’s not just the house and the neighborhood that help lenders decide whether to make presale investments. It’s also the potential risk of vandalism. “There’s no sense of putting a furnace in there if it’s going to walk away the next day,” said Abe Rabah, of Great Street Properties.

In Barrington Hills, Ill., down the street from one well-appointed home listed for $890,000, is another property, a foreclosure that went on the market at $525,000. The Tudor-style home attracted some foot traffic but no serious consideration.

The house was removed from the market and almost $20,000 of updates and repairs are being made before it’s relisted. “We’re doing everything that is going to make the property look better, but also make it financeable,” said Connie Ritchie, an agent at RE/MAX Suburban. “When you walk in now, you say this is nice and clean. This is something I can work with.”

As I stated last month we have a tricky and rocky road ahead of us but we must never forget that our market is also very finite and we will sooner than later run out of foreclosed homes and short sales.  Again, some 50% of all homes are either free & clear or have very low loan balances. Let’s jump to the numbers and see what story the market is telling us.

January-March 2005 the market closed 780 homes in the first 60 days of the New Year.  Now fast forward to the first quarter of 2008 and we closed a mighty 372 homes! Q1 2009 and we saw 558 homes close escrow. Q1 2010 and we see 769 homes close escrow with the help of the buyer assistance program executed in 2009 pushing traffic.  So what about 2011 with no government help to push sales? January-March 2011 we saw 775 closed sales.  ONLY 5 LESS THAN 2005!

Pardon my sense of sarcasm but seriously, I am told every day by moneyed and knowledgeable people that we are hopelessly mired in our own manure.  I beg to differ with such knowledgeable people.

As of this writing there are 1,854 homes in the Reno/Sparks market for sale, which used to be nearly 3,000 when the “market adjustment” started.  But wait, how many homes are in escrow right now?  1,408 homes are pending sales.  Now before I go on I said we have a tricky and rocky road ahead of us, and we do.  Nowhere are prices stabilizing or even having a hint of growth but real estate is a long term product and never was and is not now going to show short term results.  Today’s buyers must buy for the long term (i.e. five years or more) and that should be the rule forever more, but sooner than later the tough lessons learned will be forgotten and we will see another day of runaway prices but not in this decade we can be certain of that.

Our inventory is no longer the hulking monster it once was.  Today when I show homes, my real issue is that the good homes are now really hard to find.  If a buyer wants to just buy a house and not a home, we have inventory but if you want a home, well get ready for a surprise. I could have said the exact same thing in 1990 or 1995, good homes are always in short supply. 

Buyers are starting to find that if they want value, location, amenities and good condition they need to be more realistic about what they want as the number of great cheap homes is dropping.  Short sales and foreclosures are alive and well, don’t fret, and we are not going to run out of either so if you have your heart set on a foreclosure or a short sale we have plenty.  

We have agents scrambling to find rentals in the better areas today, 18 months ago that was easy, but not today.  Before I go any further if the home is overpriced it is still overpriced.  Our market has zero tolerance for anything but priced on the money.  Have great value, location and amenities or the buyers will not even seriously look.  I need to say that before sellers start saying “how come no one is looking at my home if the numbers are getting better?”  Just a quick guesstimate but probably 70% of the non-distressed homes listed for sale today are overpriced and have about a 5% chance to sell at the sellers’ price.  Those are pretty awful numbers but that is not because of the market that is because sellers five years later do not want to give up on what once was.

If the trends continue, and it appears they will, 2011 can be our pivotal year.  2011 can be the year we turn the corner and opening the door to stabilize our market so in 2013 we can rack up an average growth of .05%-1.5% and possible by 2014 a possible 2+% growth.  Ok, ok, yes I know about the phantom inventory the banks have, I know about the current default numbers, yes I know about our short sales and yes, if you still believe that we are going to sit in the basement and the manure is going to get deeper, you are probably right.

I like the numbers we are seeing. Most people will not even read about these positive changes for six more months due to the lag in national real estate reporting.  And face it, bad news sells better than good news. I like the real numbers we are seeing of people moving to our area, I like the offers flowing into my office that say buyers are buying.  That I can work with, and so can you.

The next 60 days are going to be very important to all of us.  Sales need to keep pace with inventory or we will slide backwards. Let’s keep up the good work! 

Have a great spring!

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the February 2011 edition of the Obama Administration’s Housing Scorecard. The latest housing figures show increased existing home sales as home affordability remains high, but officials caution that the market remains fragile, as prices are unsettled.

“In the face of the deepest economic recession and housing crisis in decades, the Obama Administration has taken unprecedented action to promote stability in the market—keeping millions of families in their homes and helping millions more to save money by refinancing. But the data clearly show that the market remains extremely fragile,” said HUD Assistant Secretary Raphael Bostic. “While we cannot stop every foreclosure, we know that many responsible homeowners are still fighting to make ends meet. Through the broad range of programs this Administration has put in place, we can put help in reach to those homeowners as early as possible.”

“Our housing market remains fragile. We know this from the data, but homeowners across the country can feel it too. That’s why this Administration remains committed to helping eligible homeowners avoid foreclosure where it makes economic sense to do so,” said acting Assistant Secretary for Financial Stability Tim Massad. “Every month, HAMP continues to help tens of thousands of additional families in a cost-effective manner. And by setting affordability standards and developing a framework for how mortgage servicers provide assistance to struggling families, HAMP has established critical protections for homeowners and has catalyzed improvements in modifications industry-wide.”

The February Housing Scorecard features key data on the health of the housing market including:

-The housing market remains fragile as data through January 2011 paint a mixed picture of recovery. Existing home sales ticked upward in January, but remained below levels seen in the first half of 2010. Mortgage delinquencies continued a downward trend compared to early 2010 and foreclosure starts and completions remain below peak. However, as lenders review internal procedures related to foreclosure processing, many foreclosure actions have been delayed. The decline is likely to be temporary as lenders eventually revise and resubmit foreclosure paperwork in the coming months.

-Administration efforts have been effective in blunting the effects of the deepest economic crisis since the Great Depression. Since April 2009, record low mortgage rates have helped more than 9.5 million homeowners to refinance, resulting in $18.1 billion in total borrower savings. However, home prices remain unsettled at this fragile stage of the recovery. More than 4.2 million modification arrangements were started between April 2009 and the end of January 2011—including nearly 1.5 million HAMP trial modification starts, more than 730,000 FHA loss mitigation and early delinquency interventions and more than two million proprietary modifications under HOPE Now. While some homeowners may have received help from more than one program, the number of agreements offered was more than double the number of foreclosure completions for the same period (1.8 million).

Given the current fragility and recognizing that recovery will take place over time, the Administration remains committed to its efforts to prevent avoidable foreclosures and stabilize the housing market.

For more information, visit www.hud.gov.

The form is called the Sellers Energy Consumption Evaluation Form.  It is four pages of very detailed information about the sellers’ energy usage and disclosure of any energy efficient appliances such as, furnaces, hot water heaters, light bulbs or lack thereof.

In the long run, it is probably a very good idea to highlight energy efficiency as homeowners become more aware of energy costs.  Unfortunately, the form is an information gathering device, given to a buyer who does not know how to interpret the information let alone know how to apply it to their purchase. 

It is up to the buyer to determine if the home they are buying is competitive with other homes in terms of energy efficiency.  I think it is only reasonable as the form becomes more common and is used more, that sooner or later one can reasonably expect to see a variance in property values (added or subtracted) based on their “greenness”.

The form makes no distinction whether Grandma has been living in the home, along with her four grandchildren, all under age 12 (imagine keeping Grandma’s room really warm and doing the laundry every day); compared to a similar home with just one couple that travels and works long hours and spend their weekends at their lake home (i.e. very little energy usage).   

It is suggested to all homeowners to start making changes now, while and when affordable, to start making those all-important energy efficiency upgrades.  For homeowners with homes over 15 years of age, I know that your HVAC (heating & cooling) systems work just fine, it may be well worth a serious look into the new hot water tanks or tank less systems,  as well as the new furnaces that are on the market today. Keep an eye out for the Energy Star label as an indicator of an energy efficient appliance.

Going green benefits all of us but with the new law it would be a shame to lose value in your home only because you did not know about the new law and its reasonable future effects on the market.  True, it may never affect a homes’ value but based on past experience, as buyers become more aware, it is reasonable to expect them to become much more sensitive to the age of HVAC systems, hot water tanks, appliances, lighting etc.

Questions?  Call me at 775-828-3292 or email me at david@dmorris.com and I can send you a copy of the new form.

Quote of the week… “I’ve been blamed for just about everything that’s wrong with this country.”–Elvis Presley

We who work in the real estate and mortgage industries know exactly how Elvis felt. The same people who unfairly blamed us totally for the recession now look to us alone for signs the economic recovery has taken hold. They might want to remember the health of the housing market is directly dependent on the health of the jobs market, which is not under our control. In any case, everyone felt better last week when January Housing Starts were UP a surprising 14.6%. Even though starts are down 2.6% from a year ago, this still shows builders are more hopeful going forward. The boost came from multi-family units, though single-family starts were off a mere 1% for the month.

A lot of home buying activity is due to the affordability now out there. The National Association of Home Builders (NAHB) and a major bank reported their index shows home affordability in Q4 of 2010 at its highest level in 20 years. Their measure found that 73.9% of the new and existing homes sold in Q4 were affordable to families making the national median income of $64,400.

Business tip of the week… A big part of success is not giving up. Studies show that one trait shared by all very successful people is perseverance. They are persistent, determined, tenacious, pursuing a goal far beyond the point where the average person gets discouraged.

There’s good news in the latest housing market forecast for 2011 from the National Association of Realtors (NAR). After dipping 4.8% last year, sales of existing homes are predicted to grow 7.9%  this year, to 5.3 million. The gain for 2012 is forecast to be a little less, up 4.5%, to 5.53 million. The existing home median price went up 0.3% in 2010, a nice recovery from the 12.9% price drop of 2009. For 2011, the NAR sees it rising 0.5%, to $173,000, then another 2.4%, to $177,900, in 2012.

New home sales are forecast to come back more briskly, up 17.7% in 2011, following their 15.5% drop in 2010. The 2012 projection is for a strong 51.1% sales gain, to 565,000 homes. The median price for new homes, which gained 2.2% last year, should go up another 1.8% in 2011, to $224,700, then 1.9% in 2012, to $229,000. The NAR’s chief economist says this rebound in home sales does depend on an improvement in the jobs market. Affordability also matters and in Q4 of 2010 housing was the most affordable on record, according to NAR numbers going back to 1971. The NAR feels the current situation of low home prices along with low interest rates should continue.

Nevada homeowners should be aware that property deeds and supporting documents can be obtained from the local county recorder’s office where these documents were originally filed for much less than the service being advertised.

“Consumers must be aware that official documents can be obtained from federal, state or local sources for little or no cost by applying directly to the agency involved,” said Attorney General Catherine Cortez Masto. “Many companies offer to supply documents and papers for a fee, taking advantage of unsuspecting or uninformed consumers.”

Before sending money to a company offering services dealing with goverment agencies, consumers should always contact the government agency named first. Consumers will often find the services can be obtained directly from that agency with little or no cost. In addition, the Better Business Bureau maintains a website, www.bbb.org, that provides information concerning companies doing business around the United States. Be cautious when dealing with a company not listed with the Better Business Bureau. In addition, entering the company’s name in Google, Bing or Yahoo search will often reveal information that the company is operating in a fraudulent or dishonest manner. When dealing with a non-local company, it is wise to do your internet search homework first.

While no determination has been made regarding the legitimacy of Title Compliance, any advertisement that urges quick action raises red flags. Questions regarding this matter can be addressed to the Nevada Attorney General’s Bureau of Consumer Protection at 775-684-1169.

*This type of fraudulent business practice may also be applied to companies advertising guaranteed results with loan modification. Please be very cautious with this type of service as well. The David Morris Group is available to help if you are interested in seeing the deed on your home. We can help obtain a copy for you, at no cost, through our local title companies. Please call us any time at 775-828-3292.

(MCT)—As director of the Joint Center for Housing Studies at Harvard, Nicolas Retsinas has had a front-row seat for the real estate market’s dramatic boom and bust. After 12 years at the center, Retsinas left the director’s job to teach housing finance at Harvard Business School. He spoke recently with New Jersey’s The Record about why buyers got mortgages they couldn’t afford, and why real estate matters so much.

Were you surprised by the magnitude of the housing bust and how long it has lasted?
Nicolas Retsinas: Yes, by the severity of the housing bust but even more so, how credit just seized up.

When do you see any kind of loosening-up of the credit markets?
NR: I would suspect we’re likely to see the same dominance of the government at least through the balance of this year. One of the big issues facing public policymakers is what to do with Fannie Mae and Freddie Mac. If we want to attract private capital, not only from this country but also global capital, some part of that credit risk has to be borne by the government.

One of the biggest factors in the bust was that credit standards got too easy. Buyers who weren’t qualified got mortgages. Do you have any ideas about why this happened?
NR: In part, people were granted mortgages not on their ability to repay the mortgage, because it was clear that wasn’t going to happen. But there was an expectation that even if they couldn’t pay, the future increase in the value of the property would end up being the collateral for that loan. For a long time, that was a formula that worked. But we reached a point where even with these exotic—what turned out to be toxic—mortgage terms, they just weren’t affordable.

What has been the biggest human cost of the housing bust?
NR: The biggest human cost is the millions of people who have lost their homes. One can look back coldly and say, “Well, maybe a lot of them shouldn’t have bought a home in the first place.” But a lot of people lost their homes the old-fashioned way: they lost their jobs.

Who has benefited from the bust?
NR: Beside the investors who played with different sorts of financial products, I think the key winners probably have been first-time home buyers, who have maybe longed to buy a house but could not afford to. Now we’ve essentially transferred wealth from existing homeowners to new homeowners.

Some observers have been disappointed by the number of homeowners helped by the federal loan modification program.
NR: In defense of the government, when they designed this program 18 months ago, they based it on a premise that the principal problem in the housing market was egregious mortgage terms. And if those mortgage terms could be reset and recalibrated to more typical mortgage terms and could be afforded, through subsidy or whatever means, by the borrower, that would stem the hemorrhage of the defaulted loans and foreclosures.

As we moved into 2009, the problem was less about the subprime loans and more the traditional reason why people have problems making ends meet—which is that they lost their jobs. If you modify the loan so that your monthly payments are only 31% of your income, and your income is zero, that’s probably not going to work. The problem outran the solution.

Will home-price appreciation return anytime soon?
NR: The next couple of months will be an interesting test because we’ve had the withdrawal of the home buyer tax credit. I think we’re likely to have a sort of trawl-along-the-bottom type of recovery, a little bit lumpy for a year or so.

Congress is looking at new financial regulations. What effect are these likely to have on mortgages?
NR: I think it’ll make it more difficult to go back to the Wild, Wild West. There will be a new consumer financial agency, and I think that will be more likely to look at some of these (mortgage) products. I think that’s going to be critical. RE

The real estate trend in firming home prices solidified in the second quarter with more metropolitan areas showing increases from a year ago, aided by a surge in home sales driven by the home buyer tax credit, according to the latest survey by the National Association of Realtors. In the second quarter, 100 out of 155 metropolitan statistical areas (MSAs) had higher median existing single-family home prices in comparison with the second quarter of 2009, including 14 with double-digit increases; two were unchanged and 53 metros showed price declines. In the first quarter of this year, 91 areas had higher prices, while only 26 MSAs experienced annual price gains in the second quarter of 2009.

The national median existing single-family price was $176,900 in the second quarter, up 1.5% from $174,200 in the same period of 2009. The median is where half sold for more and half sold for less. Distressed homes accounted for 32% of second quarter sales, down from 36% a year ago.

Lawrence Yun, NAR chief economist, said the correction in home prices appears to have ended in 2009. “All year we’ve been seeing relatively flat national home prices, which appear to be supported by market fundamentals,” he said. “Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market, we don’t expect any consequential movement in home prices for the foreseeable future. Very low inventory of newly built homes will also help to support home values.”

Yun urged caution on interpreting price data. “The median price is influenced by the mix of homes that were sold and do not reflect pure appreciation or depreciation,” he said. “The recorded home prices in many markets were significantly depressed last year because of a large percentage of distressed homes sold at discount. Now as more normal, non-distressed home sales are occurring, the median price in many areas is showing higher values.”

Total state existing-home sales, including single-family and condo, rose 9.1% to a seasonally adjusted annual rate of 5.61 million in the second quarter from 5.14 million in the first quarter, and were 17.3% above the 4.78 million-unit pace in the second quarter of 2009.

Sales increased from the first quarter in 44 states and the District of Columbia; 47 states and D.C. had increases over year-ago sales levels.

NAR President Vicki Cox Golder, owner of a Tucson, Ariz.-based firm, said record low mortgage interest rates will help cushion a summer slowdown. “As expected, sales are slowing down now that the home buyer tax credit has expired, but record-low mortgage interest rates, along with stable and affordable home prices in most areas, provide opportunities for buyers who weren’t able to take advantage of the credit,” she said.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was a record low 4.91% in the second quarter, down from 5.00% in the first quarter; it was 5.03% in the second quarter of 2009.

“Job creation will give home buyers more confidence, but the market over the next few months is likely to be below what we would expect for the size of our growing population,” Golder said. “With improving bank balance sheets, credit restrictions should gradually improve—Realtors are a great resource for consumer information on loan availability as well as neighborhood market conditions, which vary widely.”

In the condo sector, metro area condominium and cooperative prices—covering changes in 55 metro areas—showed the national median existing-condo price was relatively flat at $175,700 in the second quarter, down 0.5% from the second quarter of 2009. Twenty-six metros showed increases in the median condo price from a year ago; the first quarter of 2010 showed 24 metros up, while only four metros saw annual price gains in the second quarter of 2009.

Regionally, the median existing single-family home price in the Northeast declined 3.2% to $238,000 in the second quarter from a year earlier. Existing-home sales in the Northeast jumped 14.9% in the second quarter to a level of 980,000 and are 23.6% above the second quarter of 2009.

In the Midwest, the median existing single-family home price increased 1.4% to $148,500 in the second quarter from the second quarter of last year. Existing-home sales in the Midwest rose 14.5% in the second quarter to a pace of 1.30 million and are 20.9% above the same period in 2009.

In the South, the median existing single-family home price slipped 2.0% to $155,500 in the second quarter from the second quarter of 2009. Existing-home sales in the South increased 10.9% in the second quarter to an annual rate of 2.10 million and are 18.8% above a year ago.

The median existing single-family home price in the West rose 2.6% to $219,700 in the second quarter from a year ago. Existing-home sales in the West fell 2.6% in the second quarter to an annual rate of 1.23 million but are 7.6% higher than the second quarter of 2009.

The 4.5% fixed-rate mortgage is here, although more than 14 months late. That magic number, or a close approximation, was reached recently, when Freddie Mac reported a 30-year rate of 4.54%. The possibility first arose in early 2009, when the government began mass-purchasing mortgages from Fannie Mae and Freddie Mac to prop up housing. Just about everyone predicted the rates would hit what builders and real estate agents call a “sweet spot” in a few months, and the housing recovery would begin, especially if consumer confidence had recovered to prerecession levels as well.

“What gets people buying again?” asked mortgage broker Peter Buchsbaum of Arlington Capital Mortgage in Horsham, Pa. “The answer is confidence—confidence in the value not falling and confidence they’ll still have a job.”

Even if behind schedule, the 4.5% rate has arrived, but in an environment that buyers perceive as anything but inviting.

Consumer confidence fell again in July, and why? Jobs and sagging real estate values.

“People will start buying houses again when they feel securely employed, house prices are rising, and they can make low down payments,” Bankrate.com columnist Holden Lewis said. “I don’t see any of those conditions coming anytime soon, at least in most parts of the country,” Lewis said. “Job security is the most important factor.”

Suburban homebuilder Marshal Granor said that “when we went under 6 percent, I was amazed and excited, but 4.5 percent artificially increases affordability. If rates start to climb, it will severely dampen already-spotty sales.”

Moody’s Economy.com chief economist Mark Zandi concurs. “The key to more homebuying is more jobs,” he said. “Once job growth kicks in earnestly, household growth will ramp up, and so will demand.”

Zandi added that despite these “extraordinarily low rates,” many prospective buyers have little savings for a down payment and tattered credit scores.” The securely employed appear to be nibbling at the bait, however.

“There’s a new group of buyers just entering the market because of the low rates,” said Art Herling, regional vice president of Long & Foster Real Estate, although the weather is keeping them “from totally getting into the buying mood.”

Buchsbaum also reports “a greater influx of buyers than past summers.”

Philadelphia Realtor Fred Glick compared the economy to a driver with his “feet on both the accelerator and the brake at the same time.”

“Until the jobs are produced, the banks start lending, and the underwriting guidelines start to make sense, we’ll be caught in this conundrum,” Glick said.

What about home prices?

Although the Case-Shiller Home Price Index rose again in May, economists believe that prices nationally will drop 6-8% more through the end of the year.

May’s increase, economists say, is attributable to the federal tax credit that expired April 30, and to seasonal buying patterns that typically boost prices.

The indexes are three-month moving averages, “so May’s readings reflect transactions in 20 markets that closed in March, April and May,” IHS Global Insight economist Patrick Newport said. With the credit gone, “we expect them to rise for two months, then start to decline,” with recovery in 2011.

That means a lot of buyers will remain on the sidelines until prices level off completely. The lowest fixed interest rates in 50 years won’t be enough to draw them in.

“Many people are bottom-fishing,” Herling said.

On the other hand, “People are starting to view houses as places to live and build equity over time, not financial assets where they can make a killing,” said economist Joel L. Naroff of Holland, Pa. If that is the case, demand for housing would rise much more moderately. “Add to that the lack of equity and the difficulty in qualifying for a mortgage, and the outlook for sales is not great,” Naroff said.

Interest rates are rock-bottom because the economy is rock-bottom. As more investors shift their money out of a volatile stock market and to the safety of Treasurys, rates will drop further, at least in theory.

Assuming “the debt crisis abates and the economy doesn’t double-dip, both of which seem more than likely,” Zandi expects rates to close in on 5% by year’s end and over 6% next year.

“I wouldn’t bet my mortgage payment on rates remaining this low for a long time,” Lewis said. “If I were refinancing, I would lock now instead of floating in hopes of rates falling further. I think there’s a greater possibility of rates rising than falling.”