Alec Foege

The economic recovery is likely to be rocky, according to the latest Beige Book region-by-region report from the U.S. Federal Reserve on Wednesday. Tell us something we don't know. OK, the report suggests we are not headed for another recession. However, thanks to a stagnant housing market, high unemployment, gun-shy businesses and a skittish stock market, the recovery is having trouble gaining speed. The report also confirms that the homebuyer tax credit this spring created a bump in home sales that has not fully sustained itself.

Despite the month-to-month increase in home prices, some historical perspective is in order. While prices have gained 5 percent in the last year, they are still only level with housing values of around seven years ago. And the median home size is down to about 1,500 square feet. In fact, the incredible shrinking home is around 15 percent smaller than it was in 2003. But it still costs about the same. That's a pretty big (little) deal.

Once viewed as a suburban promised land, Nevada is now something of an economic desert. The state's unemployment rate skyrocketed to 14.2 percent in June, more than any other state. Around 6 percent of Nevada's homes fell into foreclosure in the first 6 months of the year. But while Nevada's problems are more severe than most states, the causes of its problems aren't that different from elsewhere. Indeed, some economists fear that the entire U.S. will soon resemble Nevada if its real estate problems persist unchecked. Everybody place your bets.

Spring certainly sprang this year when it came to residential real estate values. For the second month in a row, home prices increased from April to May. The S&P/Case-Shiller 20-City index showed on Tuesday that 19 out of the 20 cities it tracks registered price gains for May, including Minneapolis (2.8 percent) and Atlanta (2 percent). Las Vegas was the only city in the index to file a decline, with home prices now 56.4 percent below their August 2006 high. Vegas is now a gamble in more ways than one.

A leading index of property values jumped 4.6 percent in May as compared to May 2009, the largest year-over-year increase since August 2006. However, most analysts agree that the jump shown by the S&P/Case-Shiller index was largely attributable to the $8,000 federal homebuyer tax credit, which required a signed contract by April 30. Additionally, home prices exceeded forecasts for May in 20 U.S. cities. Unfortunately, the Conference Board also reported today that its consumer confidence index plunged to 50.4 in July, down from 54.3 in June.

Homeownership is being replaced by a new American virtue: renting. Landlords across the country are reporting a big increase in new leases as foreclosures push former owners into the rental market, and young adults are finding new jobs and setting out on their own. For the first half of 2010, occupied apartments rose by 215,000 in the 64 biggest rental markets. The surge is expected to translate into 5 percent to 10 percent earnings increases in real estate investment trusts, a popular investment vehicle. So be proud, be transient -- be a renter.

Leave it to American ingenuity. As more and more homeowners find themselves underwater -- that is, in possession of mortgages for greater amounts than their current homes are actually worth -- some are trying to improve their situations by selling their current homes at a loss and buying ones double the size for not much more money. Some experts say it makes a lot of sense, since homeowners can get out of bad, old mortgages and get into fresh, larger ones, without raising their monthly payment much. That's because home prices have dropped and interest rates have gone so low. Risky? Only if you believe the housing market won't recover for decades.

Back in 2007, a relatively unknown Harvard Law professor named Elizabeth Warren warned that "for a growing number of families who are steered into...risky subprime mortgages...trust in a creditor turns out to be costly." In the months after the housing crash, Warren became a very public beacon of reason -- it's no wonder she is now considered the lead candidate to head the new Bureau of Consumer Financial Protection, created by the financial bill he signed last week. Republican lawmakers and many mortgage bankers are leery of what they perceive to be Warren's anti-bank rhetoric, but many Democratic leaders and consumer advocates praise her "enormous credibility," as Treasury Secretary Timothy Geithner put it.

In any normal market, an increase in home sales would be good news. But combined with extremely sluggish price appreciation, the leading housing indicators may point to more trouble than good. Research firm Radar Logic believes these two factors, combined with a decrease in sales of foreclosed homes, suggest that the nation's housing woes aren't over yet. Some economists believe that home prices might fall as much as 5 percent in the next year if these trends continue.

On its face, it's a shocking headline -- but it's not quite what it seems. The Federal Deposit Insurance Corporation announced today that it would begin selling bonds backed by residential mortgages. If these sound a little too much like the kinds of financial instruments that cratered the economy in 2008, rest assured that these securities are quite different. For one, the $500 million in underlying mortgages come from 250 banks that the FDIC has shut down since 2008. More importantly, 85 percent of the bonds will be guaranteed by the FDIC; it may not even sell notes based on the mortgages most likely to default.

FDIC chairman Sheila Bair and Federal Reserve chairman Ben Bernanke, pictured above, discussed U.S. monetary policy yesterday.

Ever felt like you own too much house to maintain? The motley blue-blood residents of Rokeby House in Barrytown, N.Y., feel your pain. Rokeby is an 195-year-old, 43-room stucco house on 420 magnificent acres in the Hudson Valley where the famous New York Astors once promenaded. Now it is crumbling, dusty, and decrepit, and is overseen by Richard Aldrich, 69, the eldest of the 10th generation Livingston descendants. Other areas of the home are inhabited by various, artistically inclined family members, as well as friends and other relations. Meanwhile, many of the rooms remain unused and are filled with more than 100 years of collectibles, including a plaque in the front hall dedicated to 19th century architect Stanford White, who added rooms to the house.

Good intentions count, but cash is definitely better. The Treasury Department reported that fewer borrowers are receiving permanent mortgage modifications through the Obama administration's program to aid troubled homeowners. Some 530,000 homeowners, or 40 percent of 1.3 million enrolled in the HAMP program, have had their reduced mortgage payments terminated. Participants are expected to contribute a third of their income to monthly payments. The main reasons borrowers are dropped include incomplete paperwork, missed payments and an inability to meet income and debt requirements.

Think back to late 2007, before the stock market crash of 2008. If you'll recall, the first omen of the Great Recession was a housing market decline. Now some economists are suggesting that a current stall in home sales and new construction portends a new period of economic downdraft. A foundering job market, declines on Wall Street and rough global economic conditions are all cited as contributing factors. The one bright side? Home prices are more affordable than they have been in years, in many areas -- that's assuming you can meet more stringent mortgage criteria.

Just when many started believing that home sales wouldn't pick up, no matter how low interest rates dropped, the Mortgage Bankers Association registered a slight rise in new mortgage applications. Last week, as 30-year-fixed mortgage rates dropped to around 4.59 percent, new mortgage applications increased 3.4 percent. And while current levels of new home loans are still 40 percent below an April high for 2010 (due to the federal homebuyer tax credit), new refinance applications are up 30 percent in the last four weeks (and up 9 percent in the last week), only slightly below their peak in May.

The Gulf oil spill may be plugged for the time being, but the effects on the local real estate market are just beginning to trickle in. The value of property along 600 miles of coast between Louisiana and Clearwater, Fla., may decline a minimum of 10 percent over the next seven years, according to one economist. Even now, potential buyers are waiting to see what happens and backing out of deals. The area's white beaches are cleaned every night to eliminate any washed-up oil residue, but many remain largely empty.