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Yogi Berra said, “It’s not over ‘til it’s over,” but there’s a hint at least in recent housing numbers to suggest we’ll have a real bottom to the real estate market later this year.

It all comes down to supply and demand, with supply being the number of new and existing homes for sale and demand being the number of sales actually completed. Families are started even in a recession so housing units are continually being absorbed. Unfortunately the housing bubble created too many new housing units causing the market to collapse. The question this week is when will that collapse end, housing prices will firm, and existing homeowners can start to recover from their underwater mortgages? Based on housing inventory numbers from the National Association of Realtors we have another six months or so to go.

That’s how long it will take, at current building and sales levels for the inexorable population increase to absorb enough excess housing inventories to return us to historic norms. What even allows us to get back to those norms is the steep decline in builders of new homes, many of which are no longer in business.

The number of new and existing houses on the market historically is enough to last 3-4 months, which is to say at current sales rates without replacing any of those homes all would be sold in 3-4 months. But right now housing inventories stand at 9.7 months. With only a marginal influx of new homes the difference between 9.7 and 3.5 (6.2 months) is the best predictor of when the market will hit BOTTOM, after which prices will finally start to increase on a national basis.

Does this mean yu should wait six months to buy a house?  NO!  It means this is an ideal time to be shopping for a house because it is a buyer’s market.  But the perfect house is hard to find.  When you find yours, BUY IT!

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Two months after Treasury Secretary Timothy Geithner began talking about new programs to help holders of federally insured mortgages who have lost all their equity in the housing bust and are now under water, rules for the new programs are finally starting to appear. But like most of the other federal homeowner initiatives described to date, early details suggest the Making Home Affordable Program will be of little practical help to those with low-to-negative equity and less-then-perfect credit scores.

The new programs for mortgage refinancing and modification sound ideal on paper, often requiring no mortgage insurance and allowing loan-to-value ratios as high as 105 percent and requiring no specific credit rating at all as long as homeowners have remained current to date on their mortgage payments. But the devil is in the details and looking into the conforming rate sheets just published by major lenders we see new risk-based pricing adjustments (generally called “loan level pricing adjustments” in the mortgage industry) that can add up to four basis points to the mortgage principal for homeowners with LTV’s above 95 percent and credit scores below 620 – the very heart of the homeowner group in the greatest trouble.

While the government claims the programs can help 7-9 million homeowners, that doesn’t seem likely under the current rules.

On top of other pricing adjustments for property type and loan amount these new programs can add thousands to the loan balances of homeowners with low equity and less-than-perfect credit, with the increased costs often enough to price many homeowners out of the programs entirely.

A homeowner trying to refinance a loan with a 100 percent LTV and poor credit, for example, might easily see the required risk-based points take that loan beyond the 105 percent LTV limit. While it is possible to take the points from savings or investments rather than roll them into the loan, most homeowners in this group don’t have such savings or investments available.

While the new programs are good for homeowners with credit ratings above 680 and LTVs in the 80s or lower, this does not describe most of today’s conforming mortgage holders who truly need a refi or modification.

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Jumbo mortgages, those in excess of $417,000 or $729,000 depending on the market, practically disappeared with the burst of the housing bubble, but now they are coming back with major lenders like Bank of America and ING putting some real effort into the segment. But that doesn’t mean people are actually buying homes that require jumbo mortgages, according to lenders. There is a jumbo REFI boom of sorts, but nobody seems to be buying big houses that aren’t short sales or foreclosures.

Jumbo mortgages have stringent requirements, including hefty down payments. Buyers are still waiting to see if the real estate market has bottomed out, and few people these days want to commit to a big down payment if it means selling securities that are already down..

Rates for 30-year fixed-rate jumbo mortgages have dropped from an average of 7.28 percent a year ago to 6.44 percent last week, the lowest since April 2007, according to HSH Associates, which tracks consumer loan information. Rates for smaller 30-year mortgages were averaging 4.97 percent last week.

Jumbo mortgages are those too large to be backed by the federal government through Fannie Mae and Freddie Mac. Mortgages that are under those limits — $417,000 or $729,000 depending n the market — are so-called “conforming” loans.

Jumbo rates are also higher because the secondary market — where mortgages are sold to generate new funds — has dried up. Now, lenders need to keep loans on their own books, assuming the risk themselves.

Keith Gumbinger of HSH, which is based in New Jersey, said the difference between conforming and jumbo mortgage rates used to run around one-fourth of a percentage point, or 25 basis points. “So if a conforming rate was 5 percent, a jumbo would be around 5¼. Right now, that gap is extraordinarily wide. Last week, it was exactly 150 basis points.”

The Federal Reserve’s influence to lower conforming mortgage rates has produced the larger gap, he said. “The gap remains extraordinarily wide, not because jumbos aren’t doing their part. They are. But because other prices have been artificially influenced lower.”

He advised anyone looking for a mortgage or to refinance to shop around more than ever. “Some lenders are in a better position to make you a competitive loan than others. You’ve got to go out and scour around your marketplace. Shop it effectively.”

Some large lenders, including Bank of America, are starting to promote jumbo rates below 6 percent.

In time the combination of falling home prices and lower mortgage rates will improve the affordability of higher-end properties and sales will start to rise. The concern about waiting for the bottom is the only way you know you’ve hit bottom is when it is on the way up.

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One of the lessons of the current mortgage crisis has been that home ownership probably isn’t for everyone. At Home-Account we work tirelessly for the interests of homeowners and would-be homeowners, but that doesn’t mean we’ve never seen a buyer or a mortgage we didn’t like. Our objective is home OWNERSHIP – actually owning your home outright. And toward that goal we try to encourage our subscribers to work toward legitimate loan qualification, which means buying a home you can actually pay for. The recent mortgage bubble, in contrast, was often based on lenders giving mortgages to people who shouldn’t have qualified and honestly couldn’t afford the houses they were buying. The fact that the system encouraged that was because lenders were paid fees for closing loans and loans were securitized in such a way that the inevitable default was someone else’s problem. Though it turned out, of course, to be a problem for us all.

The goal of responsible home ownership then requires us to point out that there is a move afoot to return, somewhat, to the bad old days of subprime mortgages. Specifically there is a bill in Congress – H.R. 600 – which will allow seller-funded down payments for FHA mortgages. Couched as allowing friends or relatives or foundations or charities to GIVE FHA mortgage applicants the 3.5 percent minimum FHA down payment, in practical terms it allows the seller to do so, too.

Under H.R 600 it is possible under certain circumstances to get an FHA mortgage for no money down. This technique has been used before and it usually comes down to the purchase price being inflated by the amount of the down payment, which is then transferred from the seller to the buyer. This is not good.

The point of having a down payment is for buyers to be at risk a bit – to have some skin in the game — which ought to encourage them to be reliable mortgage payers. That’s our goal here at Home-Account, too – to help our subscribers to be reliable mortgage payers. But giving sellers a way to finance the down payment is for the most part a return to the slippery slope of subprime lending and will hurt us all in the long run.

H.R. 600, as it is presently written, is a bad bill and should be defeated.

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The terrible California housing market suddenly isn’t so terrible after all, depending on how you look at it.  Home resales have soared, which is good.  Home prices have plunged – a natural result of foreclosures and short sales.  In other words, the nation’s largest housing market is deleveraging itself quite handily with little government help.  Not that the government isn’t involved, having already taken action to make FHA, Fannie Mae, and Freddie Mac loans readily available to buyers who qualify under new and more sustainable standards.

So what more should the government do?  U.S. Treasury Secretary Timothy Geithner’s plan to help homeowners is months from being useful.  Maybe he should just forget it.

The best thing Congress could do at this point for the housing market might be to help mortage modifications by giving some protection to loan servicers, which currently do not have a liability shield against investors.  Congress could pass a law protecting mortgage security servicers from lawsuits, giving them the freedom to negotiate new terms with borrowers, allowing more people to keep their homes

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