Housing Starts Up 8.2%

Construction of new homes posted the biggest increase in more than two years in April and applications for new building permits turned up for the first time in five months, a rare bit of good news in what has been the worst downturn in housing in more than two decades.

The Commerce Department reported recently that housing construction rose 8.2% in April to a seasonally adjusted annual rate of 1.03 million units. A big jump in apartment construction offset further weakness in single-family homes. The gain represents a recovery after a steep slump in March building that had pushed activity to the slowest pace in 17 years.

The surprising rebound in April may be temporary, given the headwinds builders are confronting at the present — from slumping sales to soaring home foreclosures.

Even with the improvement, housing construction nationwide was 30.6% below the level of activity a year ago. The National Association of Home Builders reports that its monthly survey of builder sentiment edged down in May to a reading of 19, just above the all-time low of 18 set in December. The survey had held steady at the low level of 20 from February through April.

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Walkaway Homeowners: Fact or Fiction?

U.S. lenders claim people who owe more on their homes than they're worth are simply abandoning them, "walking away" from high mortgage payments.

Bankers say the trend is frightening because homeowners in the past have gone to great lengths to avoid foreclosure.

But the Los Angeles Times reports few banks or real estate trade groups have been able to produce hard figures about the phenomenon. Marianne Sullivan, senior vice president at Fannie Mae, said she hears more stories about walkaways but still called them "folklore."

Bruce Marks of Neighborhood Assistance Corp., a Boston group that helps homeowners, said that to the extent there are walkaways lenders should take the blame.

"Who do you see walking? They're people whose rate is about to reset and they see no way out," Marks said. "People who have a fixed-rate mortgage that was initially affordable and continues to be affordable don't walk away from their home, even when it's underwater."

Stuart Gabriel, a real estate expert at UCLA, said some of the apparent walkaways are likely to be people who bought houses as speculation and lied on mortgage applications, saying they would live in them.

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Home Appraisals: Changes on the Horizon?

A major legal brawl is breaking out over how homes are appraised, at what cost, and by whom. The outcome could directly affect the price you pay for your next piece of real estate, and the amount of mortgage money you can obtain.

The fight centers on an unusual agreement reached in March among Fannie Mae, Freddie Mac, their federal regulator, and New York Attorney General Andrew M. Cuomo. The agreement took the form of an out-of-court settlement under which Cuomo terminated an investigation of the mortgage finance giants' appraisal practices in exchange for their adoption of a far-reaching "home valuation code of conduct" covering all loans they purchase or securitize.

The code, which is scheduled to take effect on Jan. 1, would shake up the entire appraisal system:

• Mortgage brokers, who originate roughly 60 percent of all new loans, no longer would be allowed to select or pay appraisers. That could force some mortgage shoppers to pay for multiple appraisals rather than just one.

• In-house appraisers at banks and mortgage firms no longer would be permitted to do appraisals for loans to be funded by their organizations.

• Lenders would not be able to use appraisals generated by management companies - firms that contract with networks of appraisers nationwide - if they have a significant financial stake in the management company.

Inflated appraisals - often involving either pressure by loan officers or fraudulent collusion by appraisers themselves - played a role in at least some of the mess we're seeing in many housing markets.

Under the (Fannie-Freddie plan), consumers would be financially tied to the first lender they, or their mortgage or real estate professional, submits their application to. Any subsequent application may require a new appraisal, doubling or tripling the cost and time involved.

Housing Inventory Up Again in April

The number of homes for sale was on the rise again in April. Nationally, inventories expanded 3.5% last month overall and were up 6% over the same period last year.

Even some markets that used to be considered bulletproof have seen inventories grow and these bloated inventories have put pressure on home sellers to slash prices that have already been on a steep decline.

A National Association of Realtors study shows house sales remained soft in March, but the organization is forecasting sales will begin to improve over the summer.

The NAR's Pending Home Sales Index dropped 1 percent to 83 in March and was 20.1 percent lower than the March 2007 index of 103.9.

Existing-home sales are projected to rise from an annual pace of 4.95 million in the first quarter to 5.82 million in the fourth quarter.  NAR projects a median sales price of $213,700 and a 4.1 percent jump to $222,600 in 2009.