A recent report has suggested mortgage lenders had discriminated against women taking maternity leave has resulted in a settlement with Houston-based Cornerstone Mortgage Co. and charges against mortgage insurer Mortgage Guaranty Insurance Corp. (MGIC) for alleged violations of the Fair Housing Act.

The Department of Housing and Urban Development (HUD) announced last year that it was launching “multiple investigations” following a July 20, 2010, report in the New York Times that some lenders had refused to count disability payments new mothers receive while on maternity leave as income.

Lenders claimed the payments weren’t considered a stable source of  income by Fannie Mae, Freddie Mac and the Federal Housing Administration.

HUD announced a settlement with Cornerstone in June that created a $750,000 victims’ fund to pay lump-sum payments of $7,500 apiece to as many as 100 claimants. Cornerstone agreed to notify all borrowers who applied during a two-year time frame of their right to seek compensation if they experienced treatment that was discriminatory because a borrower or co-borrower was pregnant or on maternity leave.

The settlement also provided $15,000 in compensation for Dr. Elizabeth Budde, based on her claims that Cornerstone initially denied her a mortgage loan when she was on paid maternity leave and planning to return to work.

Under the terms of the settlement, Cornerstone — which is a partner with Realtor.com operator Move Inc. in the loan origination website MortgageMatch.com — adopted a new policy clarifying how it will treat applicants for loans who are on parental leave, including maternity leave, when they apply for a loan. The policy also applies to men who are on parental leave due to the birth or adoption of a child.

In announcing the settlement with Cornerstone, HUD said it was charging Milwaukee, Wis.-based MGIC with discriminating against a Pennsylvania family by denying their application for mortgage insurance unless and until the wife returned to work from maternity leave.

According to HUD’s complaint, on or about July 26, 2010, MGIC wrote an email summarizing the status of the family’s loan that stated: “(received) updated bank statements along with email from borrower that states she is on maternity leave … notifying her that we cannot proceed until borrower is back to work full time.”

John Trasviña, HUD assistant secretary for fair housing and equal opportunity, said in a statement that pregnancy is not a basis to deny or delay a loan.

“Mortgage professionals may verify income and other resources and have eligibility standards, but they may not single out women on maternity leave to deny or delay loans that they are otherwise eligible for,” Trasviña said.

After issuing a charge of discrimination, HUD referred the case to the Department of Justice, which announced Tuesday that it had filed suit against MGIC in the U.S. District Court for the Western District of Pennsylvania.

The lawsuit alleges that MGIC’s conduct constitutes discrimination based on sex and familial status, and seeks a court order prohibiting future discrimination by the defendants, monetary damages for those harmed by the defendants’ actions, and a civil penalty.

A spokeswoman for MGIC said the company does not comment on pending litigation.

The real estate market will see improvement in the remainder of this year and in 2012, but is unlikely to recover until 2013 or beyond, said speakers at this week’s Pacific Coast Builders Conference (PCBC). The conference is sponsored by the California Building Industry Association.

Held yearly at San Francisco’s Moscone Center, PCBC attendees include builders, investors, developers, manufacturers, scientists, architects, environmental engineers and landscapers, among others.

“We’re in a ‘broken W’ economy. A couple of quarters up, then down,” said Ken Rosen, chair of UC Berkeley’s Fisher Center for Real Estate and Urban Economics. He was one of three panelists in a session titled “Translating the Macro Economic Forecast to Real Local Market Knowledge.”

“The housing market may have bottomed, but chances of a housing recovery this year are pretty slim,” said Elliott Pollack, CEO of Elliott D. Pollack & Co., an economic and real estate consulting firm.

Overall, “the recovery is happening, it’s just not happening as fast as we’d like,” Rosen said.

Tight credit restrictions are one of the biggest factors constraining that recovery, he said.

“Thirty to 40 percent of the people who want to buy a house don’t qualify,” he said.

“Credit should be loosest at the bottom of a cycle,” he added.

Because 78 percent of all mortgages are held by Fannie Mae and Freddie Mac, he said, it’s up to them to ease credit standards. But any progress on that front is unlikely to happen until after the 2012 presidential election, he added.

“We won’t see anything happen until they change policies in Washington. I don’t see that happening until 2013.”

Rosen predicted homeownership might reach a low point of 65 percent before then. The rate was 66.4 percent in the first quarter of this year.

Citing CoreLogic data, he said prices for traditional, nondistressed homes are likely up slightly year-over-year. But distressed properties are “inventory we still have to liquidate,” he added.

In a separate panel, Rick Sharga, senior vice president of foreclosure data site RealtyTrac, said that at the current sales pace of about 500,000 a year, there is a 12-year supply of distressed properties hanging over the market.

That calculation includes 4 million loans currently delinquent, 1.1 million homes currently in the foreclosure process, and nearly 900,000 REOs (bank-owned properties).

That 12-year supply is a “worst-case scenario,” he said. “It won’t be that bad … but that’s the batch we have to get through.”

Some of those loans will be cured or modified, or the homes will be sold as short sales or traditional sales, he added. The biggest factor that will affect that supply, however, is a recovery in the economy, he said.

Not only should sales demand pick up, but those with delinquent loans “would have the financial wherewithal to meet” their obligations, Sharga said.

The economy lost 8.8 million jobs as a result of the downturn and has gained only 2 million of those jobs back, Rosen said. He expects the economy will regain 0.7 million jobs this year, 1.7 million in 2011, and another 1.7 million in 2012.

“It’ll be 2014 or 2015 before we regain those jobs,” Pollack said.

Much of the crisis in jobs stems from structural problems in the job market, said John Silvia, managing director and chief economist at Wells Fargo Securities LLC.

“We just have too many people in the wrong spot who don’t have the skills to compete in the 21st century,” Silvia said.

As a result of high unemployment, household formation rates have slowed, Pollack said.

“Your 25- to 34-year-olds, your first-time homebuyers, where are they? They’re living at home with mom and dad,” he said.

“When jobs improve, so will the (housing) market.”

While building activity will increase progressively between now and then, Pollack said “balance between supply and demand will not be fully achieved until about 2014. By that time, I think housing prices will go up a lot, a lot more than people are anticipating.”

His prediction echoes a survey conducted in April that found that most U.S. adults don’t expect a housing recovery until 2014 or later.

According to a report released today from the U.S. Census Bureau and the Department of Housing and Urban Development, sales of new, single-family homes rose an estimated 13.5 percent year-over-year in May to a seasonally adjusted annual rate of 319,000. Sales fell an estimated 2.1 percent from April. The median sales price of new homes fell 3.4 percent year-over-year in May, to $222,600.

Unsold inventory of new homes stood at seasonally adjusted estimate of 166,000 at the end of last month — a 6.2-month supply at the current sales pace.

The campaign to shoot down a proposal by federal regulators that lenders be required to retain at least 5 percent of the risk on mortgages they securitize when borrowers make down payments of less than 20 percent continues to pick up steam.

A coalition of consumer organizations, civil rights groups, lenders, real estate professionals and insurers coordinated with lawmakers today in bringing pressure to bear on regulators, releasing a white paper and joint letters from members of the House and Senate who have taken issue with the proposal.

Six federal agencies — the Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Department of Housing and Urban Development, Securities and Exchange Commission, Federal Housing Finance Agency — are in the process of implementing risk retention policies mandated in the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law last year.

Some provisions of the sweeping legislation were intended to address problems created when loans are bundled into mortgage-backed securities and sold to investors.

Although the loan securitization process keeps money flowing into mortgage lending and helps make borrowing more affordable, critics say it also insulated loan originators from losses and encouraged risky underwriting practices during the boom.

Requiring that lenders retain a 5 percent stake in all but the safest loans they securitize gives them “skin in the game” and encourages prudent underwriting, backers of the concept say.

At issue is how regulators will define low-risk loans that will be exempt from the 5 percent risk retention requirement — so-called “qualified residential mortgages,” or QRMs.

The Dodd-Frank bill made no specific reference to down payments, instructing federal regulators to draw up a QRM definition using criteria such as loan type, verification of the borrower’s ability to repay, full documentation, and mitigating factors like mortgage insurance.

In March, regulators proposed that only mortgages in which borrowers put at least 20 percent down be considered QRMs. The proposal would also trigger risk retention requirements on mortgages when front-end debt-to-income ratios exceed 28 percent, and back-end ratios exceed 36 percent.

That proposal sparked an outcry from not only the lending industry, but consumer organizations and civil rights groups who said it would raise the cost of borrowing for middle-class and minority homebuyers if they could not afford to make a 20 percent down payment.

“It’s unusual to see the Service Employees International Union, the AFL-CIO, NAACP, National Council of La Raza, the National Association of Consumer Advocates, and the National Consumer Law Center march arm in arm in solidarity with bankers, homebuilders, mortgage lenders, real estate agents and brokers, title companies and mortgage insurers,” Inman News columnist Ken Harney wrote of the alliance that’s organized against the QRM proposal.

Dubbed the Coalition for Sensible Housing Policy, the opposition now includes 44 consumer organizations, civil rights groups, lenders and real estate professionals, including the National Association of Realtors and the Mortgage Bankers Association.

Today, the coalition released a white paper outlining its issues with the proposed QRM definition, claiming high down payment requirements aren’t necessary for creditworthy borrowers, and that they will put homeownership out of reach for many.

House and Senate lawmakers released joint letters criticizing the proposal as too narrow, and particularly harmful to first-time and minority homebuyers.

At a press conference organized by the coalition and attended by several lawmakers, former Realtor and longtime NAR ally Senator Johnny Isakson, R-Ga., said he was “thoroughly disappointed” that regulators did not follow what he said was Congress’ legislative intent in passing the Dodd-Frank bill.

“We don’t have a down payment problem in this country, but rather an underwriting problem,” Isakson said. “I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible.”

Fears overblown?

Although regulators have extended the comment period for the QRM proposal from June 10 to Aug. 1, they have defended its intent and dismissed some fears about its impacts as overblown.

The proposed QRM definition would not require that borrowers put 20 percent down — only that lenders retain 5 percent of the risk when securitizing loans with smaller down payments. The question then becomes whether loans that don’t qualify as QRM will be significantly more costly or harder to obtain than those that do.

The risk retention rules would apply to “private label” mortgage-backed securities (MBS) not backed by Fannie Mae, Freddie Mac and Ginnie Mae. Private-label MBS — the main source of funding for subprime lenders during the boom — have been shunned by investors but are expected to re-emerge if the government winds down Fannie and Freddie.

When the QRM definition was first proposed, NAR warned that borrowers seeking non-QRM loans might pay higher fees and interest rates, totaling 3 percentage points or more.

NAR’s manager of regional economics, Ken Fears, later estimated that the difference in pricing between QRM and non-QRM loans might be as high as 2.25 percent. Last week, Fears published his latest analysis, which estimated non-QRM loans will carry rates 0.8 to 1.85 percent higher than QRM loans.

In his prepared testimony at an April 14 Congressional hearing, FDIC General Counsel Michael Krimminger said that an analysis of historical private MBS deals showed risk retention of 3 percent to 5 percent was the norm. If the market was already demanding 3 percent risk retention, the proposed rule would raise the cost of funding non-QRM loans by only 0.1 percent, the FDIC’s analysis showed.

Krimminger said that regulators envisioned that most mortgage loans — about 80 percent — would not be classified as QRMs, which would help keep down the cost of non-QRM loans.

QRM loans “will be a small slice of the market,” he said, and that will ensure that non-QRM loans will be cost effective for low- and moderate-income borrowers because they will constitute the majority of securitizations, ensuring “a vibrant and liquid secondary market.”

“The QRM exemption is meant to be just that — an exemption from the regular rules,” Krimminger said. The FDIC’s analysis of historical loan data “showed a significant relationship between higher loan-to-value ratios and increased risk of default.”

Outgoing FDIC Chairwoman Sheila Bair has a simple solution for ending the QRM debate: get rid of the QRM altogether, and apply the 5 percent risk retention requirement to all securitized mortgages.

That was the original proposal in the Dodd-Frank bill, Bair said in addressing the Council on Foreign Relations this month, American Banker reported.

“At the last minute, some in the industry got the QRM exception into the bill that basically tells the regulators to define what is the gold standard of mortgages,” Bair said. “We did that and now there’s this huge pushback on it, with the thinking being this is going to become the new normal, not just a small exception.”

Some sellers are fortunate and receive an all-cash, contingency-free offer. But most residential purchase offers include contingencies for property inspections, and appraisal and loan approval. Buyers who need to sell a home before buying might include a contingency for the sale of their home.

Until a transaction is closed, there is risk involved. For example, buyers have been known to make a big purchase, like a new car, just before closing. If the lender does a pre-closing credit check, the new car purchase could put the transaction in jeopardy even though the buyers were previously approved for the loan.

Even an all-cash offer can be risky if the money is coming from overseas and never shows up. An offer without an inspection may come back to bite you if defects are discovered after close that could have been negotiated before the transaction was complete.

An offer made contingent on the sale of another property has a higher risk factor than an offer from buyers whose funds for the down payment and closing costs are liquid. For this reason, many sellers won’t accept them.

HOUSE HUNTING TIP: Don’t turn down a contingent-sale offer just because it’s contingent. Some are riskier than others. For example, if the buyers’ home is pending sale and all contingencies are removed, it might be worth going forward with it, particularly if your home has been on the market awhile with no offers.

Contingent-sale buyers are often willing to pay more than “noncontingent” buyers. The premium is to entice the sellers into working with their offer.

Sellers who accept an offer contingent on the close of another property sale should be sure to request a copy of purchase contract for that transaction and verification that contingencies have been removed.

Ask your agent to talk to the buyers’ agent to get permission to talk with the buyers’ lender to see if there are any anticipated impediments to the close of the sales. Since appraisals have been an issue recently, an offer from a contingent-sale buyer would be more attractive if the appraisal contingency on the sale of their home had already been removed.

Make sure that your contract with the contingent buyer includes a clause that requires them to notify you in writing if their deal is canceled for any reason. You should then have the option of canceling the contract, if you want to. If the buyers have a backup offer, you might choose to continue with the transaction.

One factor to consider when weighing the merits of a contingent-sale offer is the salability of the property. This is particularly so if the buyers’ home is not yet on the market. If your home isn’t selling, it might be worth considering a contingent-sale offer from buyers whose home is likely to sell quickly. It could be located in a more coveted area, or be in a more easily salable price range.

With a contingent-sale offer, if the buyers’ home doesn’t sell, they don’t have to buy your home. The deal is canceled and you look for a new buyer. This can be a waste of time if the buyers price their home too high for the market. Include a provision that your agent must approve the list price of the buyers’ home.

Sellers who accept a contingent-sale offer can gain protection by including a clause in the contract that permits them to continue to market their home for a backup offer. A release clause or kick-out clause should also be in the contract.

THE CLOSING: A release clause allows the sellers to notify the buyers that they have a certain time (often 72 hours) to remove their contingent-sale stipulation or withdraw.

Looking for signs of an economic and housing recovery might be like watching grass grow.

Jed Smith, managing director of quantitative research for the National Association of Realtors, characterized the economic upturn as “a mediocre recovery,” and a “very slow recovery … largely because of job issues. We’re looking at up to a four-year recovery.”

Smith and other economists, who participated in a “Mid-year Economic Update” panel during an annual National Association of Real Estate Editors meeting last week, were in consensus that unemployment and the foreclosure inventory overhang loom as big barriers as the economy climbs out from its deep burrow.

“The good news is that we’re in a recovery … but we’ve got a ways to go,” Smith said.

The loss of about $14 trillion in wealth during the nation’s financial avalanche equates to the loss of about one year’s worth of income for all U.S. workers, Smith said.

He blamed a lack of job creation, “unreasonably stringent lending standards,” and depleted consumer confidence as contributors to the stagnant economy.

Distressed home sales are going to continue to account for about 35 percent of all home sales for the next two to three years as the nation works through its bloated foreclosure inventory.

Foreclosures and short sales “are not going to get a lot worse, not going to get a lot better,” in the short term.

Some other unknowns that could impact the pace of recovery: congressional reforms that could lead to substantially higher mortgage down payment requirements, and that could impact the form and function of secondary mortgage market giants Fannie Mae and Freddie Mac.

Also, Smith noted that uncertainty in the European credit markets is another wild card for the U.S. recovery.

He suggested that an easing of federal policies relating to tourist visas could be beneficial to the economy, while upgrading the skills of U.S. workers is a longer-term fix.

While home prices are generally down, “the actual market has been stable over the last three or four years,” he said, with annual sales ranging around 5 million for the past few years.

He expects sales to remain fairly constant for the next three to four years.

A promising sign for housing: “We’ve got 10 million more households in this country (now) than we did about 10 years ago,” which provides for some pent-up demand when the market accelerates.

There are changes in demographics that will impact the market, he also said, and “the two-child, one-dog, two-parent family is now about 10 percent of the American public.”

Mark Dotzour, chief economist for the Texas A&M Real Estate Center, said government stimuli have delayed recovery.

“We’re not in a ‘double dip’ in my mind,” said Dotzour — referring to some economists’ talk of a second dive into downturn after some signs of an economic rebound — “we just never hit bottom in the first place.”

The market essentially “fell off a cliff,” and the government’s “lifeline” of programs it throttled at the recession, among them the homebuyer tax credit programs, “Cash for Clunkers” auto program, loan mod programs and Federal Reserve’s purchase of Treasury debt, did not have the intended benefits.

The market “would have started coming back up to a year ago or so if we hadn’t had the federal intervention in the first place.”

“We like capitalism on the way up and socialism on the way down,” he said.

And who ultimately pays for such programs? “Not the Tooth Fairy, not Uncle Sam,” he said.

Dotzour criticized some reporting by the industry and media of price metrics that can be misleading. He noted that nonforeclosure properties may have a fairly constant price, though in reporting the average price of homes overall — including foreclosure properties — the price data can overlook the differentiation between distressed and nondistressed homes.

Like Smith, Dotzour said that there are a few key ingredients required for a recovery: “We need jobs; we need cheap mortgage money; and we need positive price appreciation.”

The “shadow inventory” of homes that have been foreclosed upon but haven’t yet been listed for sale has contributed to consumers’ uncertainty, he said, as prospective buyers “don’t know whether one (foreclosed) house in their market or 1,000 homes” may be hitting the market.

“Everybody knows there’s a huge overhang of shadow inventory that’s going to come into the market,” he said.

But there are markets that are faring better than others, and Dotzour noted, “Not every city in this country is … Phoenix or Las Vegas.”

Demand in the rental market should continue to grow because of a variety of factors, such as the foreclosure fallout that forced former homeowners to return to renting, said Stan Humphries, chief economist for online real estate valuation and search company Zillow.

“The stage is being set for very strong increases on the rent side … demand is probably going to outpace supply,” he said.

Between 1.2 million and 2.2 million homeowners are transitioning from owners to renters, and rental prices in almost all metros are expected to rise about 3.5 percent to 4 percent this year, he said.

The homeownership rate may overcorrect on the down side, sinking below the traditional standard of 64 to 65 percent, he said, but he expects that once home prices stabilize — and consumers realize home prices have stabilized — there will be a resurgence in homeownership rates.

Like Dotzour, Humphries said he does not believe that there is a “double dip” in house-price levels for nondistressed homes.

“We believe … that we’ve had a gentler, but more consistent decline from peak” in home prices, falling about 30 percent from peak levels during this downturn, he said. “We show consistent decline, no double dips.”

He added, “The good news is we’re moving in the right direction. The bad news is we don’t believe there’s going to be in the offing in the next few months.”

The federal homebuyer tax credit programs appear to have been largely ineffective, essentially “stealing” sales forward that would have occurred at a later time. “We believe pretty strongly that we paid back every bit of that stimulus,” he said, with the slumping sales that followed expiration of the tax credits.

The market’s sustained declines should end in 2012-13, and the transition of foreclosures into the marketplace and the state of employment will have a bearing on that time line, Humphries said. The pending reduction in the conforming loan limit later this year should have only a modest impact on the market, he said.

“We’re not going to hit bottom until (foreclosure resales) have peaked,” he said, which should occur this year.

Another metric that will bode well for recovery: The household formation rate must move up again to normal levels. “We need to see it get back up to levels we were seeing four months ago,” he said.

In some parts of the country, such as in some commuter communities far removed from job centers, demand may never return to the levels seen during the boom years, Humphries said.

“We are seeing signs that people want to live closer-in — they want to live in smaller homes,” he said.

And just as consumers are being forced to live within their means, so must the government, said panelists.

“We’ve got to stop expanding our debt. Everybody’s figured that out except for Congress,” Dotzour said.

Shaun M. White, vice president of corporate communications for Re/Max International, who spoke during a separate panel addressing the foreclosure crisis, said the nation has already seen about 3.5 million to 4 million foreclosure sales — which he expects is roughly a halfway point.

White said he believes it’s critical to quickly “get through the large number of (foreclosure) properties that are out there and move on.”

There is a place in this market for “the responsible investor,” he said, as investors can play a valuable role in the recovery.

The average time it is taking to foreclose on delinquent owners climbed to 400 days in the first quarter, and 619 days in Florida, according to RealtyTrac data, White noted — the numbers have been impacted by the so-called robo-signing scandal and other problems with foreclosure processes that have slowed foreclosure time lines.

“We are at a 40-month low in the number of properties in the foreclosure process (but) don’t let that fool you — banks are going to get this going and I think you’ll start to see those numbers increasing again,” he said.

The federal government’s loan modification programs have so far not put much of a dent in the problem of delinquent borrowers, he said.

But Robert Doggett, author of the ForeclosureBuzz.org blog who is with Texas Rio Grande Legal Aid Inc., a nonprofit organization that provides free legal services to low-income residents in Southwest Texas, said that he believes a call for expedited foreclosures and short sales is a wrong-minded approach.

There are some parties who stand to gain from foreclosure sales vs. loan modifications, he said, and some homeowners find that the programs that are supposed to help consumers avoid foreclosure are failing them.

“There’s no place for these folks to go,” he said. “They don’t want to be there. They want options. They don’t have them. My interest is trying to prevent foreclosures from happening.”

He said, “There are incentives for these (loan) servicers to foreclose, and there’s not for servicing, modifying the loans.” HAMP, the Making Home Affordable Program, “is a joke,” he said, and the system is extremely tough for consumers to navigate.

White said that Realtors do work to help consumers avoid foreclosure. “When Realtors talk to lenders they tell them what they think of the way they’re handling the foreclosure problem. We counsel our Realtors, ‘If (you) can help a homeowner without making a commission at all — do it. It will help you in the long run,” he said.

“Lots of our agents work for free to help people with short sales, a deed in lieu, whatever it may be. We’re trying to be proactive and reach out and contact that homeowner,” he said.

Also, White said that Re/Max has encouraged banks to “streamline their short-sale process. We think that we’ve made tremendous strides there. We’re not where we would like to be but the problem is better than it was.”

Short sales, he said, are “a great alternative to foreclosure and we need to get bankers and lenders to acknowledge that so it can happen and so it can happen in a reasonable amount of time.”

The decision of whether to buy or sell a home is perplexing. A lot of buyers and sellers are still wondering if now is the right time to be in the market.

Ideally, buyers would like to know that the market has hit bottom and that the value of what they buy won’t decline. Sellers who will sell at a loss today wonder if they should get out now or wait for a better market to sell.

When will that better market appear? It’s impossible to time the market. We’ll know that we hit bottom after the market turns around — not before. Some economists think this will take another two years; others expect a turnaround in five to six years.

Many economists think we’re at or close to bottom. However, it’s expected that the market will be rocky for some time. The market will change seasonally. For example, it’s typical for home sales to decline during the winter months.

HOUSE HUNTING TIP: Good and bad news can affect whether buyers feel optimistic about homebuying. The fact that the conforming jumbo loan limit is likely to drop to $625,000 from $729,750 could spur home sales in higher-priced markets between now and September, when the higher loan limit expires.

Interest rates have been fluctuating but remain below 5 percent for conforming, fixed-rate mortgages. Interest rates and affordability in general have a great impact on the strength of the housing market.

The news about the real estate market was discouraging at the beginning of the year, as hopes of a solid recovery were dashed by declining home-sale volume and prices. Some economists even predicted that the housing market was headed for a double-dip recession, but this doesn’t look likely at this point.

March brought good news as home-sale volume nationally picked up 3.7 percent from February, according to the National Association of Realtors. However, the sales were primarily driven by investors buying cheap foreclosures.

Although investor purchases were up, the percentage of first-time-buyer purchases was down, possibly due to tough mortgage qualifying criteria, which are expected to become even more difficult going forward.

Leslie Appleton-Young, chief economist for the California Association of Realtors (CAR), points out that it’s difficult for buyers to trade up or down if they don’t have equity in their homes. According to CAR, approximately 25 percent of homeowners in the U.S. owe more than their home is worth. Appleton-Young believes the figure is closer to 31 percent in California.

As grim as the picture looks, it’s not the same everywhere. Residential real estate is a localized phenomenon. The San Francisco Bay Area is a good example. Although median prices are still lower than they were a year ago, the number of homes sold in the Bay Area in March was the best showing in four years. Sales volume was up 41.3 percent from February and up 0.2 percent from a year ago, according to MDA DataQuick.

However, within the Bay Area there was considerable diversity. Several higher-priced counties, which haven’t seen much activity until recently, saw gains. These included San Mateo County, where sales were up 8.6 percent, and Santa Clara County, up 3.9 percent. Both counties benefit from the Silicon Valley rebound. Jobs are necessary for a healthy housing market.

In Alameda County, home sales declined 7 percent in March. Even so, there are hot spots within the county. Select neighborhoods close to shops, transportation and good schools defied statistics with high buyer demand and over-asking-price sales.

THE CLOSING: Keep an eye on trends, but focus on your local neighborhood when making decisions about buying and selling.