I was floored at an LA Times article that was published yesterday. It is positive for the outlook of Real Estate. This is a copy of the article:

LA TIMES DEC 1, 2006
Falling mortgage rates and a rally in home builder stocks are leading some analysts to suggest that the worst of the nation's housing slump may be over.

Although data released Thursday showed U.S. home prices making their smallest quarterly gain in eight years, some forward-looking indicators point to a stabilizing residential market.

Home builder stocks rallied sharply Thursday after an analyst's upgrade. The sector was one of the strongest in November, with the Standard & Poor's home builder index gaining 10% last month, extending a rally that began in July and suggesting that investors see an improving outlook.

"While this real estate cycle has yet to play itself out, we are skeptical of the dire warnings of pundits," Zachary Karabell and Daniel Chung, analysts at investment firm Fred Alger & Co., said Wednesday in a client note.
They joined a small but growing chorus — including Federal Reserve Chairman Ben S. Bernanke and his predecessor, Alan Greenspan — in saying the sector might have bottomed out.

The nation's housing market is still soft compared with the last three years, when prices and sales soared by double-digit percentages in many parts of the U.S., including California. There are three times as many homes for sale today and sales have declined as would-be buyers wait to see whether prices will fall. Even optimistic analysts say the sector may not be out of the woods yet, with some once-hot markets still vulnerable to further price and sales declines.

But recent drops in bond yields, which in turn have lowered mortgage rates, are helping to keep the housing sector from free-falling, some analysts say.

The average rate on a 30-year fixed-rate mortgage in the U.S. fell to 6.14% this week, according to mortgage giant Freddie Mac. That was the lowest rate in 10 months and below the year-ago rate of 6.26%. The 15-year fixed rate and the one-year adjustable rate also declined.

What's more, the once-dizzying pace of price appreciation has been replaced by low to moderate increases without calamitous results.

"The transition from sizzling markets to normal or weak markets has been orderly so far, and recent drops in interest rates lessen the likelihood that precipitous changes will occur," said Patrick Lawler, chief economist of the Office of Federal Housing Enterprise Oversight.

His Washington-based agency reported Thursday that in the third quarter, U.S. home prices rose 7.73% over year-ago levels, off a peak of 13.94% in mid-2004. On a quarterly basis, prices rose 0.86%, the smallest increase since the second quarter of 1998.

In California, prices in the third quarter rose 10.2% year over year, making it the 16th-best-performing state for home values, said the federal housing office, which compares prices of the same houses sold or refinanced over time.

On a quarterly basis, statewide prices ticked up a scant 0.62%, in line with other data showing low to flat price gains in many California locales.

California fared better than several states, including Massachusetts and New York, where prices declined from the second quarter to the third, the housing office reported.

Slowing price gains are among the factors that analyst Daniel Oppenheim cited Thursday as "incremental positives" that are easing his worries about the real estate market.

Oppenheim, who covers home builders for Banc of America Securities, believes that the sector is regaining some of its strength. He based his view on data he has collected showing increased traffic from potential buyers in 33 of 39 U.S. real estate markets, improved affordability and a concerted effort by home builders to pull back on construction as they sell off their bloated inventories.

"We believe that the improving affordability — due primarily to the decline in mortgage rates, but also the modestly lower home prices — is leading to the slight improvement in traffic," he said in a report explaining why he was shifting his yearlong stance on builder stocks from "cautious" to "neutral."

His comments buoyed home builders' stocks and helped propel the S&P's index of 16 major builders up 5.7% on Thursday.

Article

yea... right.

I listened to the senate confirmation hearings today for the new defense secretary and they kept saying how much they needed to spend to replace and upgrade systems and equipment. If they push that through it will certainly the market.... like the 350 billion spent on Iraq.

My friend in a nearby city recently sold 25 homes at a new subdivision within 2 weeks. Of course, it is the largest builder (D.R. Horton) and they have priced their homes to sell

This in from The Creative Investor

Pending Home Sales Indicate Market Stabilization

Posted: 12/07/2006 12:00 AM

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WASHINGTON, DC -- /PRNewswire/ -- Pending home sales are hovering in a narrow range, another indication that a stabilization is occurring in the housing sector, according to the National Association of Realtors(R).

The Pending Home Sales Index,* based on contracts signed in October, slipped 1.7 percent to a reading of 107.2 and is 13.2 percent lower than October 2005. The index had trended up from a cyclical low of 105.6 in July, and a decline from year-ago levels is narrowing. In September, the index was 13.6 percent below a year earlier, while in August the decline was 14.0 percent.

David Lereah, NAR's chief economist, said a fairly steady pace of home sales can be expected for the next two months. "It's important to focus on where the housing market is now -- it appears to be stabilizing, and comparisons with an unsustainable boom mask the fact that home sales remain historically high -- they'll stay that way through 2007," he said. "In addition, a temporary correction in prices distracts from the fact that it is primarily the number of home sales that affects the economy, and the number for this year will be the third highest on record."

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and year-ago changes in sales performance than with month-to-month comparisons.

Regionally, the PHSI in the Midwest slipped 0.6 percent in October to 95.8 and was 15.4 percent below a year ago. The index in the South declined 1.7 percent to 122.9 and was 9.3 percent below October 2005. In the Northeast, the index eased 2.1 percent in October to 88.0 and was 13.5 percent lower than a year earlier. The index in the West fell 2.7 percent to 109.5 and was 17.4 percent below October 2005.

The National Association of Realtors(R), "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer parallel between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than there is with month- to-month comparisons.

The forecast will be revised December 11, and existing-home sales for November will be released December 28. The next Pending Home Sales Index will be on January 5.

Information about NAR is available at http://www.realtor.org/. This and other news releases are posted in the News Media section. Statistical data, charts and surveys also may be found by clicking on Research.

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Source: National Association of Realtors