A housing bottom? No, but the plunge is over

This post comes from Marilyn Lewis of MSN Money.

The good news about housing is that prices aren't as awful as they were.

Prices are rising and, as of November, the latest data available, stand where they were in September 2003, as the real estate boom was taking off. The Standard & Poor's Case-Shiller Home Price Index released last week reports that in four cities -- Los Angeles, Phoenix, San Diego and San Francisco -- month-to-month prices have risen over six straight months or more.

Michelle Meyer, a Barclays Capital economist, told Bloomberg, "We're seeing what looks to be a bottoming out in prices."

Great, just four more years of loss to make up and we'll be back to square one.

Here's an example of what's going on: In prosperous Orange County, Calif., The Register reports the median selling price for houses and condos reached $430,000 in January -- that's up 8.9% from a year ago but still 33% below June 2007's peak of $645,000.

It's encouraging, too, that sales -- the volume of transactions -- also are growing. Lawrence Yun, chief economist for the National Association of Realtors, says that, even taking into account that government is propping up sales with tax credits, the number of signed contracts is growing.

Two steps forward, one step back

Don't get too excited. While the S&P report says prices are up 0.2% in November 2009 over the November before, they're still 30% below the 2006 peak. And prices aren't rising everywhere. Mostly, progress still is measured by improvements in the rate of decline: The Case-Shiller index --measuring prices between November 2008 and November 2009 -- reports the smallest decline in six years.

Even where there are price improvements, they seem fragile and iffy, not a strong, steady month-to-month progression. The Case-Shiller index reports that, in four of the 20 cities it follows -- Charlotte, Las Vegas, Seattle and Tampa -- prices hit new lows in November, and "any gains they might have seen in recent months have been erased."

Sellers are bringing their prices down to meet reality, says Altos Research's Scott Sambucci in a Webinar on housing market indicators. New sellers are starting at lower prices than last spring. They seem to be telling themselves, he says, "Gosh, I know what homes sold for, or I know what homes were listed for last year, last spring, and I'm feeling like I'm going to have to price my home just a little bit lower."

The reality check: In mid-2008, about half of listings had a price reduction; now, sellers price more accurately to start and, once on the market, drop their prices less frequently, and by less money.

Next question: What effect will the feds' withdrawal of housing subsidies (homebuyers' tax credits expire April 30 and the Federal Reserve ends its $1.25 trillion purchase of mortgage-backed securities next month) have on home purchases and prices?

"The impact of the massive government effort to support house prices led to small increases in prices over the summer, and the question is what happens to prices as these programs end over the next six months. I expect further price declines in many cities," blogs Calculated Risk.

The Wall Street Journal (“Mortgage bulls bid Fed fond farewell”) reports that, despite fears about the effects of the Fed withdrawal on mortgage rates, so far the impact hasn't been all that bad.

Related reading: 

• A guide for first-time buyers
• Rates remain near historic lows
• Is there a double standard on mortgages?