My colleague Prashant wrote recently about a second wave of foreclosures possibly headed our way in the second half of this year as banks tried to unload homes they can't refnance. But for now at least the big wave of bank-owned properties appears to have crested. Thank moratoriums, bailouts, reforms, and negotiations that help strapped homeowners hang on to their properties, says the property information specialists at Foreclosures.com.

They say that foreclosures nationally dropped 11% in the second quarter to 205,000. Compare that to 231,000 in the first quarter of this year. “Preforeclosures”—those folks who are late on their payments and heading in the bank-owned direction-- fell 10% in the second quarter to 494,078.

Even on a month over month basis things seems to be getting better. June’s foreclosure numbers reached record lows for the year. “These huge drops—double-digit in many parts of the nation—are a sigh of relief for the economy and housing markets as they bump along toward recovery,” says Alexis McGee, president of ForeclosureS.com. “Despite higher unemployment rates, industry and government stimuli are making a difference. It’s not just depressed properties that are selling anymore.”

McGee says the big surprise has been the 3% drop in new filings year to date versus 2008 in both foreclosures and preforeclosures. It’s not a huge drop, but it’s not the tidal wave of bad news some experts had been predicting.

Meanwhile people are buying more of the homes that are out there—foreclosures or otherwise. The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending July 3. New loan applications increased 10.9 percent. Partly that’s due to still-low interest rates. The average rate for a 30 year fixed rate loan was 5.3%, with points of 1.13 percent.

Here is a regional breakdown of foreclosures.

It seems that people are moving in with friends and family, or are finding roommates.

Effective rents, which include concessions, fell 1.9% from a year earlier and 0.9% from the previous quarter.

Spring is normally a good time for landlords to find new tenants, so the vacancy increase is particularly distressing for apartment owners.

San Jose, San Francisco, Las Vegas, Orange County, and Seattle had the worst effective rent drops for the quarter, according to Reis. Birmingham, Chattanooga, Louisville, Norfolk, and Syracuse had the highest rent increases.

The four-month-old anti-foreclosure program has -- at least so far -- shown weak results. According to the Obama administration's own estimate, "over 50,000" loans were modified to make payments more affordable for borrowers at risk of default, The New York Times reported. That's a small number considering that millions of new foreclosures are expected in the next couple years.

Paul S. Willen, senior economist at the Boston Fed, told The Boston Globe that it would probably make more sense to give the money directly to struggling homeowners to cover their payments because lenders aren't eager to do loan workouts because they aren't profitable.

The Obama plan would give bonuses and other incentives to loan servicers to modify loans ($1,000 for each loan they modify and $1,000 each year that a borrower says current on their modified loan payments).

According to The Globe:

Willen said the success bonus could have the unintended effect of steering loan servicers away from those who need help the most, and toward only those borrowers most likely to recover on their own anyway. He said that if modifications increase, it won’t be by much. “My guess is they are going to help people who are OK, and they are not going to help people who are deep trouble,’’ he said.

Listing agents are the Realtors that represent the sellers of the home. They split the commission, paid by the seller, with the agent representing the buyer. In some markets where banks are dumping foreclosed properties the competition has gotten so fierce there are often multiple offers over the asking price. The listing agent is supposed to present the offers to his client but are they more apt to push an offer when there is no buyer's agent and they get to keep both sides of the commission?

That's the argument made by one reader named Janer on the Redfin message board.

"To Everyone out there just want to share with you the "Secret" since I can so relate to your frustration with being outbid on properties and properties going pending before you even have a chance to write an offer and I am speaking from experience - DROP YOUR AGENT and when you see/find a property you like find out who the listing agent is (you can go to www.realtor.com and type in the MLS# ; towards the bottom of the page it will tell you who the selling agent is and usually have a telephone number to contact. We had been looking for several months and being told by our buyer agent that we were being outbid like most of you or according to the listing agents they were already pending with only one or two days on market. The only offer we made and that was accepted which I wrote about in an earlier thread was when we bid way high over list price per our last agents advice to "get" the property and according to our agent the Bank would lower $$ to near the appraisal if it came in lower - WRONG! Bank wouldn't lower and we had to walk since there was such a huge gap between appraised value and our offer. We had to eat $275 for inspection and $450 for appraisal. Oh sorry, still haven't gotten over that yet... Anyways, we decided to drop our last buyer agent (mind you this was our third) and try this new strategy; we found a property we loved and contacted the listing agent all I got was his voice-mail so I left a message that we were interested in his listing and were also looking for a buyer's agent since we didn't have one. I got a call back I swear within an hour to show the property, we saw it, loved it and he wrote up our offer same day and per his advice asked for 3% closing costs paid by seller. Our offer was accepted today; day after we wrote offer at list price which comps show property is right at. Coincidence this could all happen so fast not to mention even getting an offer in considering we have been trying for months?? I think not. I will let everyone know how the process comes along but as of now my mantra is: If these listing agents want to play games to get their double commissions I say "let the games begin".

What do you think of this strategy?

The Chicago Tribune had good piece today on another wave of foreclosures that could arrive as soon as this summer. Lenders are now moving ahead with foreclosures that had been delayed by self-imposed and state-government moratoriums that expired in the past few months.

First-time home buyers and investors are responsible for the spike in sales, especially in hard-hit California, Florida, Nevada, and Arizona. But the inventory of bank-owned homes is now likely to grow, putting increasing pressure on already low prices. And the rising unemployment rate will only compound the situation.

"The rapid pace of layoffs is of particular concern," the Tribune article reads. "Homeowners who have lost jobs have little chance of getting their mortgages modified. That puts many homeowners on a collision course with banks that are preparing to take a more aggressive stance on loan modifications."

In a string titled "All Cash offers can go to hell!!!" a reader named Westfoe had this to say:

"I've been looking for a house for the past 3 months. I'm approved Fha with 20% down. Almost every house that we think is about to go thru or that we are the highest bidder, there some cash only a-hole that snakes it from us!!! Am I the only one???

How about the Family's that actually want to live at the house not rent it out for profit?"

Are investors who have the resources to pay cash being fair to families that just want to buy their own home? Is selling to investors in the best interest of the community? The term 'pride of ownership' gets used a lot in real estate circles. It means home owners take much better care of properties than tenants.

Elsewhere in the same string a reader argues that investors are playing a key role in getting us out of this crisis. They are getting problem assets off of bank balance sheets--freeing the banks up to make more loans. Demand from investors is also driving up home prices--critical to a recovery.

What do you think?

ING Direct, the discount stock broker best known for its bright orange logo and branches that look like sandwich shops, is releasing a survey on people’s attitudes toward home ownership and mortgages on July 7.

Thankfully, two thirds of the 2,100 people surveyed still believe that home ownership represents the American Dream. Asked what could have prevented this housing meltdown and 42% said requirements for bigger downpayments would have reduced the number of foreclosures. More than 40% also said they may refinance their mortgage this year.

ING is promoting one of its products called the Easy Orange mortgage. The idea is that you can make payments every two weeks instead of once a month and pay off you mortgage faster. Of course you can usually pay more toward your mortgage without incurring fees, but for most people in the past decade paying off a loan early was a radical concept.

I can still remember my Dad’s glee when he tossed the burning receipt from his very last mortgage payment in the fireplace. Hopefully more people will take that approach in the future and get out of debt instead of under it. That way the American Dream doesn't become a national nightmare.

The parallels are almost eerie. A world-famous singing sensation, known for his distinctive dance moves, glittery wardrobe and bizarre behavior, dies of heart failure amidst a pile of prescription drugs. Fans line up outside the gates of his estate—waiting to pay their respects to the King. It’s Michael Jackson we’re talking about though, not Elvis. But there is still plenty of speculation that Jackson’s famous home—Neverland Ranch—could become a tourist attraction ala Presley’s Graceland.

For days rumors swirled that his family was considering a public viewing of Jackson's body at Neverland, a 2,800 acre spread, located 33 miles northeast of Santa Barbara, Calif. News crews booked hotel rooms. AT&T and Verizon were allegedly moving in emergency cell phone antennas. The appearance of a cement truck at the ranch on June 30 had readers of celebrity gossip site TMZ.com speculating there may even be a crypt under construction.

The man who controls the ranch, real estate investor Thomas Barrack, is mum about the long term plans. Barrack’s Colony Capital bought the $22 million mortgage on the property just before it went up for auction last year. It’s now owned in a joint venture with Jackson’s estate, says Barrack spokesperson Joanne Lessner. She released an effusively worded letter from Barrack to local residents on June 30. Citing pioneering California missionary Junipero Serra, Jackson’s 2005 acquittal on child molestation charges and “a Western tradition of kindness and hospitality,” Barrack asks his neighbors to bear with the public onslaught and let the world take in the “magic elixir” of the Santa Ynez Valley.

Locals say it is highly unlikely Barrack or the Jackson family could get permission to build a Graceland-like tourist attraction at the site, however. Local real estate broker and long time area resident William Etling recently blogged about the issues that might prohibit such a development. The ranch, he notes, is zoned for agricultural not commercial use. After talking with a local mortician, Etling says it is unlikely that Jackson’s body could legally be buried on the property.

Then there is the issue of the community support. Last year voters in Santa Barbara County shot down a candidate for supervisor who was seen as pro-hotel development. Locals, including celebrity residents such as Bo Derek and David Crosby, have vigorously opposed expansion plans by the local Chumash Indian casino. Lately locals have taken to calling the ranch Never!-land.

As a real estate broker, Etling would seemingly have an interest in seeing more development of the bucolic region, which saw a surge in tourism five years ago after the movie Sideways was filmed there. But Etling says the largely wealthy area residents have no interest in opening more of their valley to John Q. Public. “It would depreciate our property to have that carnival,” he says. “It’s not that type of place. It’s very stable. There’s not a lot of mobility.”

Jackson’s ranch is located about five miles north of the tiny wine country hamlet of Los Olivos. It’s one of the most beautiful spots in the country, blessed with rolling hills, vineyards and cool, damp air from the nearby ocean.

It is a part of the world Barrack knows well. He’s owned a ranch and vineyard near Neverland for three decades. Last year he reached a settlement with neighbors that allowed him to open his Happy Canyon Winery to wine salespeople and critics but not for public wine tastings, which locals had opposed.

Retired venture capitalist Bob Field, who says his own property overlooks Barrack’s vineyard, has another suggestion for his neighbor—dismantle Neverland and take it piece by piece to Las Vegas, where Barrack’s company owns the Las Vegas Hilton and an interest in Station Casinos—a string of gambling joints aimed at local residents. “This is a small valley,” Field says. “We don’t have the roads, hospitals or airport. It will take him multiple years to develop anything here. It would cost him a fraction of that in Las Vegas. The day it opened, there would be many times the visitors.”

If a Neverland museum doesn’t get developed in Vegas or Los Olivos there are other cities that might welcome it. The mayor of Jackson’s hometown of Gary, Indiana is practically begging to have the star’s remains find a permanent home there.

Investors purchase stocks online. Will they buy somebody’s mortgage over the Web as well? A start-up called BigBidder.com hopes so.

The backers of BigBidder already run lfc.com, a commercial real estate auction site, and Freedom Realty Exchange (fre.com), a site that sells homes online.

Paul Lyons, a senior vice president of the company, says BigBidder is auctioning off home loans owned by banks, mortgage companies and other investors. The loans are both performing and non-performing—--the latter meaning the homeowners aren’t making their monthly payments. Lyons says much of the site’s sales are in “re-performing” loans, meaning the home owner was delinquent until the lender changed the terms of the loan and now the borrower is making payments again.

BigBidder charges the buyer a fee of from 1% to 5% of the loan purchase price, depending on the size of the loan. Some recent deals include an $83,000 first mortgage carrying a 9.8% interest rate on a 3 bedroom house in Gas City, Indiana. It sold for less than half of the loan amount. Meanwhile, a $100,000 adjustable rate second mortgage on a home in North Hills, California currently carrying a rate of 6.2% sold for just 25 cents on the dollar. Both of those loans were performing.

Lyons says documentation, such as the original loan application and credit reports on the borrower, is available on the Web site. I’m not recommending anyone dive into this kind of investment, certainly not without a lot of thought and research. Judging by those discounts the sellers don’t think these loans are going to get paid back in full any time soon.

"The pace of decline in residential real estate slowed in April,” says David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor's. ”Every metro area, except for Charlotte, recorded an improvement in monthly returns over March. While one month’s data cannot determine if a turnaround has begun, it seems that some stabilization may be appearing in a few of the regions."

The worst hit cities include Phoenix (down 35%), Las Vegas (-32%) and San Francisco (-28%). Best performers were Denver (only down 4.9%), Dallas (-5%) and Boston (-7.7%). Dallas has held up the best since its market peaked in June 2007, falling only 9.6%. Phoenix fared worst, off 54% from its June 2006 peak.

Cameron Findlay, the Chief Economist of mortgage site LendingTree.com, says the clearest sign of where the housing market is now, lies not in a national price index from two months ago but in the cost of mortgages today. Rates on a 30 year conventional mortgage have dipped down to 5.37% from a recent high of 5.74%. That’s telling us the housing market hasn’t recovered. The Fed is still committed to buying $300 billion of long-term Treasury bonds to inject more liquidity into the system, he notes.

“There was a wide anticipation that the Fed would ease off on, not purchase as much,” he notes. “Bonds started selling off, rates started rising.” That's changed. Findlay expects rates to stay at this level at least until the Fed finishes its bond buying in September or until more convincing signs emerge that the housing market has come back.

“It’s still down,” Findlay says of the Case-Shiller index. “The only positive news is that Colorado slightly improved. There’s still extreme pressure due to (mortgage) delinquencies.”

I stopped by Dwell on Design, a home design show sponsored by Dwell magazine at the Los Angeles Convention Center this weekend. This was the kind of event I expected to be really slow during the Great Recession. It cost $25 to get in and had a lot of cool, but pricey products on for sale, everything from $3,000 Ligne Roset arm chairs (and they are cool) to my bottle of Vitamin Water which cost $3.80 including tax (convention center pricing). There was actually a pretty decent-sized turnout.

The big hit seemed to the handful of prefab homes on display. Green Inc. is a Los Angeles company that makes dwellings out of converted shipping containers. That’s one of their homes above.

Modern-Shed makes the most stylish sheds you’ve ever seen. Like the Green Inc. structures, Modern-Shed’s products start at around $10,000. The company wisely positions them not as a hipper replacement for the $1,000 aluminum shed you could buy at Sears but as a low-cost addition to your home. While my wife and I liked that idea, my mother-in-law and niece didn’t seem to too keen on sleeping in the shed.

Also generating a lot of interest was a 400 square foot cottage made from reclaimed wood and other products. The cottage was very cool, kind of a cross between a shabby chic country house and the Unibomber's cabin. It’s made by an Austin company called Reclaimed Space, which auctioned off that actual home on eBay. The winning bidder paid $75,000. I remember one of the staffers in the house saying that home typically sold for $60,000, although in this case half the proceeds went to Habitat for Humanity.

Are banks overwhelmed and understaffed for all the work coming out of the housing bust? On June 24, Ciitgroup said it was temporarily suspending new loans brought to them by independent mortgage brokers as it seeks to fix “quality control” issues regarding loan documentation. Rob Jenson, a real estate agent with the Jenson Group in Las Vegas says he’s been trying for eight months to get Bank of America to approve the sale of house for less than the loan amount, a so-called short sale that banks say they are working more diligently to accommodate. “It’s insane,” Jenson says. “It’s getting worse.”

The house Jenson is having problems selling was originally listed for $795,000 in November. It's a five bedroom, 4,500 square foot home in the Vegas suburb of Summerlin. Jenson immediately got a full-price, all-cash offer which he submitted to the bank late last year. “It took two to three weeks to get a workout negotiator,” he says. “Then they order an appraisal, additional documents from the seller.” Two months later the bank said okay to $795,000, but by then the buyer had moved on.

That started the process all over again. Jenson brought in another buyer, but this one needed to get a loan. By then the house had fallen in value. The property appraised at only $747,000 and the buyer couldn’t get a mortgage for the higher purchase price.

Jenson said the bank negotiator he’s been dealing with said she’s got 145 files that she is working on at once. “Bank could create some jobs,” a frustrated Jenson says. “They should hire more negotiators.”

We could have walked away like everyone else and said, 'We don't care.' But we loved our neighbors and our neighborhood. We hold ourselves responsible.

I don't know why she fell behind on her mortgage in the first place, but I admire her sense of responsibility at this stage.

Hat tip to Matt Stichnoth at Seeking Alpha.

The important thing here is that home sales aren't falling, indicating that a bottom might be near. Michelle Meyer, economist with Barlays Capital in New York, told me that she thinks the increase is good news. But she also pointed out that the sales that closed in May went into contract a month or two earlier. So the rising interest rates have yet to be factored into the sales data.

Interest rates for a 30-year fixed mortgage have increased from 5.13% on April 1 to 5.76% on June 17, according to Bankrate.com.

"It reflects housing conditions in April, prior to the runup in mortgage rates," Meyer said. "I don’t know how it will respond to the jump in mortgage rates in the last month."