That reduction of supply does not in itself guarantee a revival for the depressed homebuilding industry, but it does remove one obstacle.

Historically, there was a loose relationship between the population over 16 years of age and the number of new homes sold each year, with an average of 376 homes sold for every 100,000 people from 1963 though 1996. The rate fluctuated with the economy, of course, falling during recessions and when interest rates were high, and rising when the economy recovered or interest rates were declining. But the booms were mild compared with the one that came in the middle of the last decade. Then, when the credit crisis and recession arrived, homebuilding collapsed.

Combining the boom and the bust, new-home sales have actually adhered to the historical average. From 1997 through March of this year, the average rate was 375 homes sold per 100,000 people. But, during the boom from 1997 until 2007, 1.8 million more new homes were sold than would have been expected under the historic average. Since 2007, two million fewer homes have been sold than would have been expected.

That calculation would seem to indicate that there is no longer a large overhang of available new homes for sale. That is confirmed by government figures indicating that at the end of March, there were only 144,000 new homes for sale, the lowest level since the government began collecting data in 1963. Of those, 48,000 had been finished, with the rest either planned or under construction. In early 2008, 199,000 finished homes were for sale.

The supply has not been exhausted in all areas, of course. Areas where speculation was most intense, like Las Vegas, still may have too many homes available for sale.

A low supply of new homes does not, by itself, affect demand, and there are reasons demand remains subdued. Many new homes are historically sold to homeowners moving up. Those homeowners need buyers for their existing homes, and they may be hard to find now. In addition, many homeowners cannot trade up now because they owe more on their old homes than the houses are worth.

Other impediments to a significant rise in new-home sales include stringent credit standards for new mortgages and the psychological scars left from the collapse in home prices.

There are indications that fewer households have been formed in recent years than would have been expected from population growth. More young adults have stayed with their parents, while other people who lost their homes or jobs were forced to move in with relatives. If and when the economy improves, many of those people could seek housing of their own, creating a sudden increase in demand.

A major reason the recovery from the 2007-9 recession got off to a slow start was the lack of a contribution from the homebuilding industry. That may be changing. In the first quarter of this year, reported Friday, residential investment was estimated to have grown at an annual rate of 19 percent. The figure was up 8.8 percent from the same quarter a year ago, for the largest annual rise since 2004.

Similarly, while sales of new homes remain low by historic standards, the number of sales in the first quarter of this year was up 17 percent from the same period of 2011. That was also the best year-over-year gain since 2004.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

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Alarmed by the conditions in illegal rental housing that are putting tenants, as well as firefighters, at risk, a county in upstate New York has turned a task force on the problem.

In Rockland County, municipal lawmakers, firefighters and health department employees have joined together in an effort to impose strict fines and possible imprisonment on landlords who violate fire codes and other housing standards.

The problem: When a family home is converted into several illegal apartments, the haphazard construction that usually goes into them can create a cramped and perilously unpredictable layout that can leave occupants and first responders wandering or trapped in an emergency.

"I don't know any other county that's doing something similar," says Gordon Wren Jr., director of Rockland County's Fire and Emergency Services. "Rockland Fire Services have said, 'Enough is enough.' "

Read the full story on Nyack-Piermont Patch.

See also: As Rental Market Tightens, 6 Tips To Get the Home You Want

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Find homes for rent in your area.
Find out how to calculate mortgage payments.
Find homes for sale in your area.

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The Departments of Housing and Urban Development (HUD) and Treasury issued the administration's January Housing Scorecard on Monday.  The report is essentially a summary of data on housing and housing finance released by public and private sources over the previous month and/or quarter.  Most of the data such as new and existing home sales, permits and starts, mortgage originations, and various house price evaluations have been previously covered by MND. 

The scorecard incorporates by reference the monthly report of the Making Home Affordable Program (MHA) through the end of December.  This includes information on the universe of MHA programs including the Home Affordable Modification Program (HAMP), HOPE Now, and Second Lien Modifications and other initiatives. 

Since the HAMP program began in April 2009 1,774,595 homeowners have entered into trial loan modifications, 20,074 since the November HAMP report.  About half of these homeowners, 933,327, have completed the trials and converted to permanent modifications; 23,374 conversions took place during the current report period.  Just over three-quarters of a million of the permanent modifications are still active.

While the HAMP program dates to April 2009, it underwent substantial revisions to its policies and procedures in June 2010, and many of the measures of its performance are benchmarked at that time.  Eight-four percent of homeowners who entered a trial modification after that date have received a permanent modification with an average trial period of 3.5 months compared to 43 percent who entered a trial prior to the changes.  As of December, 21,002 of the active trials had been underway for six months or more; in May 2010, the month before the changes took place, 190,000 trials were six months old or more.  In December every servicer except Ocwen was above an 80 percent conversion rate.

HAMP modifications with the largest reduction in mortgage payments continue to demonstrate the lowest redefault rates.  At 18 months after modification all loans have a 90+ day default rate of 23 percent.  However, loans with a 20 percent or smaller reduction in loan payment are defaulting at the rate of 36.4 percent while loans with a 50 percent payment decrease or greater have a default rate of 13.3 percent. 

The Home Affordable Foreclosure Alternatives program offers incentives to homeowners who wish to exit home ownership through a short sale or deed-in-lieu of foreclosure.  Thus far 43,368 homeowners have been accepted into the program and 27,665 transactions have been completed, the vast majority through a short sale.  More than half of the completed transactions (18,350) were on loans owned by private investors; 7,711 were portfolio loans and 1,604 were GSE loans.

There has been an emphasis in some quarters on reducing the principal balance of distressed loans since the last HAMP report.  Some members of Congress have asked for justification from the GSEs as to why they were not participating in principal reductions and the Treasury Department recently urged them to do so as well while tripling the incentives it is paying to other investors to reduce principal.  The HAMP Principal Reduction Alternative (PRA) has started trial modifications for 63,203 home owners and permanent modifications for 42,753 of which 40,374 are still active.  The median principal amount reduced in these modifications is $67,196, a median of 31.1 percent of the principal balance.

Each month HAMP reports on selected servicer performance metrics.   Servicers are expected to make Right Party Contact (RPC) with eligible homeowners and then evaluate their eligibility for HAMP.  HAMP evaluated servicer outreach to 60 days delinquent homeowners over the previous 12 months (November 2010-December 2011) and found most services have made RPC at least 85 percent of the time; however there is a wide range of performance results in terms of completed the evaluations.  

Servicers are also expected to identify and solicit homeowners in early stages of delinquency and, effective October 1, 2011, a higher compensation structure was put into effect to reward servicers who complete evaluations and place homeowners in a trial modification within 120 days of first delinquency.  The table below shows the status of major servicers relative to their eligibility for maximum incentives.

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As encouraging housing statistics coupled with testimony from bullish real estate experts points toward a possible market turnaround, a handful of towns are leading the charge to recovery.

Somewhat counter-intuitively, many of the markets making the speediest recoveries also turn out to be some hardest-hit by the foreclosure crisis. Florida, which was walloped from the housing bust, contains a majority of these market forerunners.

Drawing on rankings compiled by Realtor.com that determine top recovering markets -- based on measures including year-over-year median price appreciation, year-over-year median inventory age and year-over-year inventory reduction -- AOL Real Estate brings you the top 10 towns on the road to recovery. Click the gallery above to see the full list.

Also see:
Top 5 Real Estate Markets to Watch in 2012
Out-of-Towners Covet Florida Real Estate, Locals Scratch Heads

More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.

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Saying that the housing crisis struck right at the heart of what it means to be middle class, President Barack Obama has begun to flesh out the housing-related proposals he made in his State of the Union speech last Tuesday.  He spoke this morning at Falls Church, Virginia about his housing plans, some pieces of which have already been put into effect by the Departments of Justice (DOJ), Treasury, and Housing and Urban Development (HUD) in the eight days since they were first announced. The President spoke only briefly and most of the information about his proposals comes from a Fact Sheet released by the White House just before his speech.

The most ambitious part of the Administration's housing plan is the expansion of several existing programs to streamline refinancing for homeowners with existing high interest rate government or Fannie Mae/Freddie Mac mortgages. The President wants to extend these opportunities to homeowners with standard conforming non-FHA, VA, or GSE mortgages through a new program run through FHA.  To be eligible the homeowner would have meet a few simple criteria:

Borrowers will need to have been current on their loan for the past 6 months and have missed no more than one payment in the 6 months prior. Borrowers must have a current FICO score of 580 to be eligible, a requirement met by approximately 9 in 10 borrowers. The loan they are refinancing is for a single family, owner-occupied principal residence.

A streamlined application process will make it simpler and less expensive for both borrowers and lenders.  Borrowers will not be required to submit a new appraisal or tax return, merely verify current employment.  Those who are not employed may still be eligible if they meet the other requirements and present limited credit risk, however, a lender will need to perform a full underwriting of those borrowers.

The President's plan includes additional steps to reduce program costs, including working with Congress to establish risk-mitigation measures including requiring lenders interested in refinancing deeply underwater loans to write down the balance of these loans before they qualify.   There would be a separate fund created for the program to help the FHA track and manage the risk involved and ensure that it has no effect on the operation of the existing Mutual Mortgage Insurance (MMI) fund.  The estimated $5 to $10 billion cost of the program would be paid by a fee on the largest financial institutions based on their size and the riskiness of their activities

There were also some changes suggested for GSE refinancing programs.  President Obama said he believed the steps he proposes are within the existing authority of the FHFA but the GSEs have not acted so he is calling on Congress to:

Eliminate appraisal costs for all borrowers by using mark-to-market accounting or other alternatives to manual appraisals where Automated Valuation Models cannot be used to determine loan-to-value ratios.Direct the GSEs to require the same streamlined underwriting for new servicers as they do for current servicers to unlock competition and lower borrowing costs. Extend streamlined refinancing to all GSE borrowers including those with significant equity in their home.

There are also proposals to streamline refinancing for borrowers in the USDA and FHA housing programs but the White House noted that the current FHA-to-FHA streamlined refinancing program has met with some resistance from lenders who are afraid to make loans that might compromise their FHA approved lender status.  FHA is removing these loans from their "Compare Ratio" process which should open the program up to more borrowers.

Borrowers utilizing either the Home Affordable Refinancing Program (HARP) or the new FHA-based program would be given an alternative to allow them to rebuild the equity in their home.  This option would require refinancing into a 20 year mortgage and the homeowner would continue to make the old mortgage payment.  The excess money would be applied directly to principal that, along with the shorter term would allow the homeowner to quickly rebuild equity.  To encourage borrowers to make this choice (which also reduces lender risk) the administration is proposing legislation to provide for the GSEs and FHA to cover the loans' closing costs.

A Homeowner Bill of Rights proposed by the Administration would apply to the mortgage servicing system which the White House said "is badly broken and would benefit from a single set of strong federal standards."  Among the items proposed for this Bill of Rights are:

Simple, Easy to Understand Mortgage Forms Disclosure of all known fees and penaltiesNo conflicts of interest between servicers and investors or servicers and junior lien holders.Assistance for at-risk homeowners to include early intervention, continuity of contact, and time and options to avoid foreclosure.Safeguards against inappropriate foreclosure including the right of appeal, certification of proper process.

The President plans to include $15 billion in his Budget for a national effort to hire construction workers to rehabilitate hundreds of thousands of vacant and foreclosed homes and businesses.  Similar to the Neighborhood Stabilization Program, Project Rebuild will enlist expertise and capital from the private sector, focus on property improvements, and expand property solutions like land banks.  The Budget will also provide $1 billion in funding for the Housing Trust Fund to finance the development of affordable housing for extremely low income families while providing jobs in the construction industry.  

Other initiatives which the President talked about this morning or which were covered in the White House Fact Sheet have already been launched in the last few days including a joint investigation with the states into mortgage origination and servicing abuses, expansion of eligibility criteria for HAMP and increased incentives for lenders in the program to reduce principal balances, and a pilot sale announced to transition foreclosed properties into rental housing in certain highly distressed communities which was announced by HUD this morning

The White House said that, while the government cannot fix the housing market on its own, the President believes that responsible homeowners should not have to sit and wait for the market to hit bottom to get relief when there are measures at hand that can make a meaningful difference, including allowing these homeowners to save thousands of dollars by refinancing at today's low interest rates.

Conventional wisdom holds that the President's proposals will be "dead on arrival" when they reach Congress and, in fact the reaction of Speaker of the House John Boehner to the speech was, "How many times are we going to do this?  How many times are we going to suggest programs to help people who can't make payments on their mortgages?  The programs don't work."

A kinder assessment was released in a statement from David H. Stevens, President and CEO of the Mortgage Bankers Association.  Stevens commented specifically on the Homeowner Bill of Rights saying the Association agrees that a single national set of standards "can help provide confidence and certainty in the real estate market for borrowers, lenders, and servicers alike."

He also commended the administration for "recognizing that more can be done to get our housing market on track.  The programs announced today will give lenders and other stakeholders additional tools to help borrowers and foster a renewed confidence in our real estate finance system."   

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In his State of the Union address, President Obama laid out a Blueprint for an America Built to Last, calling for action to help responsible borrowers and support a housing market recovery. While the government cannot fix the housing market on its own, the President believes that responsible homeowners should not have to sit and wait for the market to hit bottom to get relief when there are measures at hand that can make a meaningful difference, including allowing these homeowners to save thousands of dollars by refinancing at today’s low interest rates. That’s why the President is putting forward a plan that uses the broad range of tools to help homeowners, supporting middle-class families and the economy.  FACT SHEET

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WASHINGTON -- The Obama administration is trying to fix a stubborn drag on the economy by allowing millions more homeowners to refinance their mortgages at lower interest rates, even if they owe more than their homes are worth -- tackling a difficult issue of vital concern in states key to President Barack Obama's re-election.

Obama on Wednesday was to draw attention to a proposal he outlined in his State of the Union address: to allow homeowners with privately held mortgages to take advantage of record low rates, for an annual savings of about $3,000 for the average borrower. Obama was detailing his plan during a visit to a northern Virginia community center.

The administration proposal faces a major hurdle in Congress. The program would cost between $5 billion and $10 billion, depending on participation, and would be paid for by a fee on large banks. The administration has tried unsuccessfully before to win support for such a tax on large banks.

The administration estimates that 3.5 million borrowers would have incentive to refinance under the new plan.

The plan would expand the administration's Home Affordable Refinance Program, which allows borrowers with loans backed by government-affiliated mortgage giants Fannie Mae and Freddie Mac to refinance at lower rates. About 1 million homeowners have used it, well short of the 4 million to 5 million the Obama administration had expected. Moreover, many "underwater" borrowers -- those who owe more than their homes are worth -- couldn't qualify.

The new administration plan would permit homeowners to refinance their mortgages into loans backed by the Federal Housing Administration. To qualify, borrowers with privately held mortgages would have to have no more than one delinquency in the six months preceding refinancing. Their loans would have to fall within the mortgage limits set by the FHA in their home counties.

Under the program, banks would have to reduce mortgage balances for homeowners who owe more than 140 percent of the value of their homes.

The features of the new proposal were confirmed Wednesday by a senior administration official, who spoke on the condition of anonymity. The Wall Street Journal first reported the details Wednesday.

Borrowers 'Bill of Rights'

The Obama administration also plans to announce new industry standards for mortgage servicers, a sort of "bill of rights" for borrowers that would protect them in their transactions.

Obama also is expected to announce a program that would allow the sale of foreclosed homes by Fannie Mae to investors who would then offer the properties for rental. Administration officials say there is a high demand for rental housing and such a program would also sustain neighborhoods by keeping foreclosed homes from falling into disrepair.

A punctured housing bubble was at the center of the recession, prompting widespread foreclosures and leaving millions of homeowners with houses valued at less than their mortgages. Hit hardest were Nevada and Florida, two states that figure prominently in the presidential campaign and that Obama is counting on winning to secure re-election.

Under the refinancing plan, any homeowner current on his or her mortgage could take advantage of historically low lending rates. The average rate for a 30-year mortgage is 3.88 percent.

About 11 million Americans -- roughly 1 in 4 with a mortgage -- are underwater, according to CoreLogic, a real estate data firm.

Half of all U.S. mortgages -- about 30 million home loans -- are owned by nongovernment lenders.

Copyright 2012 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

Also see:
Candidates Put Housing Crisis at Fannie and Freddie's Doorstep
Obama State of the Union Plan Inadequate for Housing?

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