Bendix Anderson

Big news on unemployment: the unemployment rate stayed put at 9.7 percent in February, according to today's release from the federal Bureau of Labor Statistics.

That's a pleasant surprise. Economists expected the unemployment rate to rise to 9.8 percent, after winter storms in February kept many construction and retail workers home.

But if you are among the many people worried about hordes of unemployed borrowers falling further behind in their mortgage payments, potentially leading to millions of new home loan foreclosures later this year, then today's news provides little reassurance.

Looking to buy a home? You probably didn't have a lot of competition last January. The number of people who signed contracts to buy homes shrank as cold weather and a slack economy kept many potential buyers home, according to the Pending Homes Sales Index, created by the National Association of Realtors.

The Pending Home Sales Index fell 7.6 percent to 90.4, from an upwardly revised 97.8 in December. Analysts had expected a slight rise. January was the third month in a row that the index has been flat or falling.

That means fewer people bidding up home prices -- bad news if you're selling, but good news if you're in the market to buy.

The economy is strengthening in most parts of the U.S. -- but the recovery isn't translating into new jobs, according to the Beige Book report released today by the Federal Reserve.

That doesn't bode well for the housing market, since long term unemployment is one of the top reasons homeowners are still losing their homes to foreclosure, and foreclosure is still the biggest threat on the horizon for the housing recovery, according to many experts.

But the report showed strengthening demand in the residential real estate market -- at least for low-priced homes.

The number of new single-family houses sold hit a record low in January, according to the U.S. Dept. of Commerce, raising new questions about the already shaky recovery of the housing markets.

"The road to a housing and economic recovery remains very uncertain," says David Crowe, chief economist for the National Association of Home Builders. "Competition from below-market-priced foreclosed and short-sale homes poses an additional challenge to the new-homes market right now.

New homes sold in January at a seasonally adjusted annual rate of 309,000. That represents a drop of more than 10 percent from the annualized rate of sales in December of 348,000 a year, and a more than 6 percent drop from January 2009's rate of 329,000 homes.

The biggest federal program to fight home loan foreclosures is finally making some progress.

More than 116,000 homeowners had received permanent loan modifications through the federal Home Affordable Modification Program as of the end of January, according to the U.S. Department of the Treasury and the Department of Housing and Urban Development.

Another 76,000 homeowners have been approved for permanent modifications - officials are now waiting for them to return their signed documents. That's a total of 192,000 homeowners approved for permanent modifications - a big jump for the program, which struggled for most of 2009 to achieve any significant number of permanent loan modifications.

The stakes couldn't be higher. Foreclosures are the anvil holding down the housing market and its wobbly recovery.

Reading the headlines about the latest Case Shiller report on home prices is a little like looking at one of those two-sided optical illusions.

NPR and the New York Times say home prices are up. The Wall Street Journal's MarketWatch and Chicago Sun-Times say home prices are down.

Here's the real picture: Home prices fell slightly in December, according to the latest Case Shiller Home Price Index, released today by credit agency Standard & Poor's. But they fell less than you would expect for a cold weather month, since few people are normally out buying homes in the weeks before Christmas. When the index is adjusted for the season, prices look ever so slightly higher.

And that's great news, since every month that passes without massive fluctuations in the housing market is a step closer to stability.

The Fed may have bumped up the short term interest rate that banks pay to borrow money by a quarter-point, but for the rest of us, low interest rates are still here.

Despite months of predictions that interest rates must rise soon, average interest rates for 30-year, fixed rate mortgages slid back down to 4.93 percent in the week ending February 18, according to Freddie Mac's Primary Mortgage Market Survey.

That's close to the record low interest rates of end of last year, which bottomed out at a average 4.71 percent for the week ending December 3.

Average interest rates are expected to rise to 6 percent by the end of the year, pushed up by a long list of factors.

The number of newly-fired workers who filled out claims for unemployment grew again last week. The rate of initial unemployment claims rose to a seasonally adjusted rate of 473,000 a week for the week ending February 13, according to the Dept. of Labor.

That's up 31,000 from the week before, leading to a flurry of dour headlines. However, the overall trend for the past month, as reflected by a four-week moving average, is still gradually improving. The average rate of new unemployment claims over four weeks was 467,500, down 1,500 from the week before.

Still, the unexpected rise dampens some of the enthusiasm generated by last month's decline in the unemployment rate, which fell to 9.7 percent for January, and casts doubt on a near term housing market recovery.

That roar you heard last month was the sound of builders pounding nails and digging the foundations of new homes, which they did at a faster rate in January than any other time in the last year.

Housing starts rose to a seasonally-adjusted annual rate of 591,000 per year in January, according to the U.S. Census. That makes January the top month so far in what has been a long steady rise in housing starts from its low point at 479,000 last April.

But we're still a long way from a healthy housing market. Put in context, the January numbers are still less than a third the rate in 2006 and less than half the rate in 2007. The economists at Freddie Mac predict the rate of starts will continue to rise, but won't reach 2007 levels until 2011.

Here's another clue that the mini-recovery in home building should continue. Applications for building permits -- a reliable omen of future construction activity -- were made at a quicker pace in January than any month in the last year except December.

For many critics, watching the government pour more and more taxpayer money into Fannie Mae and Freddie Mac is like watching a slow motion horror flick. One critic likened the companies, which were seized by the government in 2008, to monsters like Godzilla, Frankenstein and Dracula.

The reality is a little more complicated -- but not by much. Fannie and Freddie are better summed up by another horror film cliche: Dr. Jekyll and Mr. Hyde.

Like the dual-personality character in the Robert Louis Stevens thriller, Fannie and Freddie had two sides to their businesses. And, as the beleaguered companies come under increasing attack, it is useful to understand the differences.

The foreclosures of Stuyvesant Town and Peter Cooper Village earlier this month were just the beginning. Banks are likely to seize many more apartment buildings in New York City this year, according Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, an organization of local nonprofit groups fighting to preserve New York's little remaining affordable housing.

"About 100,000 units of affordable housing in this city were grossly over-leveraged from 2005 to 2008 and are likely to have severe financial problems," says Dulchin.
In a wide ranging interview with HousingWatch, Dulchin discussed his concern that these buildings might go through the foreclosure process only to be purchased at auction by new speculators.

Fewer people are getting bad news in the mailbox: the number of foreclosure fillings dropped again in January, according to the latest information from RealtyTrac.

There were 315,716 foreclosure filings in January -- that's down 10 percent from December. Cheery news, at first glance. But more than 300,000 foreclosure filings in a single month is still tremendously bad. In Jan. 2008, before the full brunt of the crisis struck, the rate was just over 200,000 foreclosure actions a month. But that rate was enough to set into motion the chaos in the nation's bond markets that later spread to the rest of the financial system.

There have been well over 300,000 foreclosure filings a month for the last 11 months. Worse, a growing number of experts and economists seem to expect a new wave of foreclosure filings in 2010. That's includes the boss at RealtyTrac.

"If history repeats itself we will see a surge in the numbers over the next few months as lenders foreclose on delinquent loans where neither the existing loan modification programs or the new short sale and deed-in-lieu of foreclosure alternatives works," said James J. Saccacio, chief executive officer of RealtyTrac.

Peace in our time! Mission accomplished! Unemployment down!

The unemployment rate unexpectedly dipped below 10 percent in January, to 9.7 percent, according to the Labor Department. And stock markets rallied on the news.

A jobless rate below 10 percent is certainly good for morale -- and for real estate. But hold the bubbly: the unemployment figure fell because fewer people are filing for unemployment benefits, not necessarily because lots more people have found jobs.

Look closely and you'll see that the number of unemployed and the number jobs available for them has been treading water in recent weeks -- neither is getting much better or much worse.

A housing smackdown is coming to Capitol Hill.

Rep. Barney Frank (D-Mass.) has set March 2nd as the date for the first hearing on the future of housing finance. Though sweeping in scope, the review will surely center on the uncertain future of Fannie Mae and Freddie Mac.

It won't be an easy ride for the embattled Fannie and Freddie. Frank, chairman of the House Financial Services Committee, recently declared that the two troubled mortgage giants should be wiped out and replaced, according to news outlets including Bloomberg News. Republicans, too, are calling for drastic changes.

The high-stakes hearings are likely to shape the role of the federal government in the housing market going forward. Considering that almost every home loan written today is guaranteed by Fannie, Freddie, or the Federal Housing Administration, Congress is about to decide nothing less than the future of housing.

Pending home sales were up in December. The metric -- which measures the number of signed contracts to buy a home -- is considered a key leading indicator of where the housing market is going.

The seasonally adjusted index of pending home sales was 96.6 in December, according to the National Association of Realtors. That's up about 1 percent from November, and the fifth highest monthly tally in two years.