A private financial conference held in London last week saw bankers from the USA airing their views on the present housing and mortgage situation. Some of the top executives of American banks presented their forecasts and offered the audience a perspective into the inside world of real estate forecasts. On the whole the bankers were optimistic about the situation.

The hardest hit state so far has been California, which has seen a spew of foreclosures and dropping prices of real estate. According to Kerry Killinger, CEO, Washington Mutual the last month has seen a slight improvement in the state. His company is closely monitoring the situation as this may be an indication that the downslide in real estate is finally evening out.

Chief financial officer, Wells Fargo, Howard Atkins believes that lower rates of mortgage coupled with affordable housing and capital infused banks can together help the market recover within the year. Quoted in the American Banker newspaper, Atkins’ views promise a brighter future for the hard hit real estate market.

The latest federal pricing data however does not reflect this upbeat mood. The Office of Federal Housing Enterprise Oversight is the agency responsible for tracking home values on behalf of the federal government. Issued last week, its quarterly report cites a 4.4 percent decline between January and March 2008 in California. This makes the predictions of improved conditions by the bankers all the more significant in the second quarter.

California’s declining real estate prices are not reflected throughout the country, however. Of the 292 metropolitan areas surveyed by the report, 56 percent have actually shown an appreciation in real estate values in the last year. Topping the list is Houma-Bayou, Louisiana with a 11.2 percent gain, closely followed by Grand Junction, Colorado at 9.1 percent. Wenatchee, Washington (up by 8.1 percent), Austin, Texas (up by 7.7 percent) and Billings, Montana (up by 7.1 percent) also find places at the top of the list. State wise, real estate in Wyoming appreciated by 6.3 percent, in Utah by 5.6 percent, in Montana by 4.9 percent and in Texas by 4.7 percent.

These figures once again highlight the fact that real estate is a highly localized asset. Fluctuations in value in different states do not necessarily affect prices everywhere. Thus on the one hand there are states like California and Florida which experienced highs of 25 percent increases at one time and have hit rock bottom more recently. On the other hand, there are those states that have plodded along on a steady keel, experiencing neither extreme.

“Slow and steady” seems to be the mantra of the future.

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According to the Conference Board, consumer confidence is at its lowest in the last 16 years. Since 1982, consumers have not faced such a bleak future in terms of jobs and inflation. With housing prices at low ebb, gasoline costing more and inflation affecting food and medical bills, consumers are indeed hard hit.

This is reflected in the fact that fewer people are spending on high expenditure items like cars and homes. Consumers appear confronted with the walk away prices for all sorts of goods.

With rising gas prices, 2007 saw fewer people using their own vehicles and resorting to public transport instead. Statistics from the American Public Transportation Association support this, showing a two percent increase in the usage of public transportation last year. In fact, the Department of Transportation recorded that Americans drove 4.3 percent fewer miles in March 2008 than a year ago. This amounts to 11 billion miles less in the overall count. The Energy Information Administration too anticipates a 0.4 percent fall in gas consumption as compared to last year.

As with gas consumption, a pullback has also been observed in the housing market. With fewer people investing in homes the prices have fallen steeply. The Office of Federal Housing Enterprise Oversight (OFHEO) reported that housing prices went down by over 3 percent in the first quarter of 2008. In 43 states the purchase index reflected a fall in prices with California and Florida showing the highest decline. Wyoming, Utah, Montana, Texas and Alabama however showed an appreciation in home prices.

The purchase index bears testimony to the all encompassing credit crunch as well as the fear holding the housing market in its grip, even in areas which are economically strong.

The trends reflected by the purchase index are significant. The calculation of the price declines are based on homes that have been purchased with conventional loans from the government sponsored Fannie Mae and Freddie Mac. These secondary market providers are overseen by OFHEO. This makes the report all the more significant as these calculations exclude volatile jumbo and sub-prime loans unlike other purchase indices.

The Commerce Department offers a ray of hope in this situation. According to it, April 2008 saw new home sales going up by over 3 percent. Although this figure is still 42 percent less than what it was at the same time last year, it is an optimistic sign. And maybe, home buyers are not at the walk away price yet.

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