Of course, any government efforts to jump-start the housing market have a number of obstacles, the biggest being borrowers' worries that the economic downturn will affect them and that the best interest rates will go only to borrowers in sound financial shape. And even if the efforts go as planned, it will take a while to help the most distressed homeowners.

Still, the jump in refinancing activity showed that there was an appetite that could be whetted by lower rates. The Mortgage Bankers Association said its refinance index, which measures refinancing activity, tripled to 3,802.8 last week from the week before.

The index also was 37.7 percent higher than in the same week a year ago. It was the largest increase in refinance applications in the survey's 18-year history, though it doesn't measure how many applications become loans.

Refinancing activity accounted for 69.1 percent of all mortgage applications submitted last week, up from 49.3 percent the week before.

“We did quadruple our normal volume last week,” said Bob Walters, chief economist for Quicken Loans. “We had loan officers staying past midnight to get back to all of the people that had been calling. There is still a silent majority of people who can refinance and qualify.”

Dave McDonald, president of the San Diego County chapter of the California Association of Mortgage Brokers, also said the drop in lending rates has given a boost to business.

“This was welcomed,” he said. “This has been a rough year for mortgage brokers and our customers.”

Still, McDonald said many local homeowners who would like to use lower interest rates to refinance their loans can't do so because they owe more on their present mortgages than their homes are worth.

Callers cited a variety of reasons for their new interest in refinancing, mortgage lenders said. But the main reason was that they wanted to lock in a lower mortgage rate and reduce their monthly costs in case they fell victim to the economic downturn.

Others were looking to extract cash to pay down more expensive credit-card debt, and some were trying to trade in their adjustable-rate mortgages for a fixed rate, the lenders said.

The Treasury's consideration of additional efforts to breathe life into the housing market was first reported on The Wall Street Journal's  Web site. People familiar with the Treasury's plans said that Treasury officials met with top executives at Fannie and Freddie last week, but that neither had been notified that any steps had been taken toward putting such a plan into effect.

By one account, the new program would be available only to home buyers, not to people who simply want to refinance their existing loan at a lower rate.

But those looking to refinance are already eyeing the lower rates. “Borrowers with reasonably good credit and a home that hasn't lost too much value are going to find mortgage money plentiful and readily available,” said Brad Blackwell, national sales manager at Wells Fargo Home Mortgage.

As rates drop, more people, in theory, qualify for loans because their monthly principal and interest payments will be lower. But to qualify for the best rates, borrowers need to have impeccable credit – or a credit score of 720 or higher – as well as at least 10 percent to 20 percent of equity in their homes.

And while experts said they were heartened by the pickup in activity, the overall number of refinancings this year was expected to be only slightly more than one-quarter of the volume at the height of the housing boom in 2003.

“It is not going to spike up rapidly or anywhere near as it has in the past because credit is still tight, the economy is still weak and there are fewer people that could refinance now than could before,” said Celia Chen, senior director of housing economics at Moody's Economy.com. “But the decline in rates will help those that can.”

Staff writer Emmet Pierce contributed to this report.

Without even counting in the latest prices, the National Association of Home Builders also reported yesterday that 38.7 percent of homes on the market in the third quarter were affordable to San Diego households earning the median income.

San Diego's prices have come down so much – off 37.5 percent from the peak in November 2005 – that the area ranks as only the 31st least affordable out of 222 markets surveyed. That's the best showing since the builders began tracking affordability in 1991. Just four years ago, San Diego ranked as the least-affordable market nationally.

“The sales numbers show a lot of resolve among buyers who have decided now is the time to buy, despite some of the worst news on the economy and in financial markets in a generation,” DataQuick analyst Andrew LePage said. “No doubt some shoppers paused in late September and early October as they were bombarded by disturbing news on the economy. But so far, we have not see homes fall in the way retail sales have.”

Among other findings in the DataQuick report:

October was the third month in a row that sales increased, the only time that has happened for this time of the year since 1992, also a recessionary period.

It was the fourth month in a row to have a year-over-year increase in sales, following four years of year-over-year drops.

Prices dropped for the 28th straight month on a year-over-year basis and for the 16th month on a month-over-month basis. The year-over-year decline was 29.7 percent and the drop from September was 1.4 percent.

Homes that sold after being previously foreclosed in the past 12 months represented 48.6 percent of all resales – 1,595 out of 3,282 – a record share. That was up from 47.3 percent of resales in September and 20.8 percent in October 2007.

All subregions of the county saw more sales activity, but the biggest rise took place in neighborhoods where foreclosures have been especially rampant, leading to particularly big price drops.

For example, Oceanside's foreclosure-plagued ZIP codes toted up 229 sales last month, compared with 93 a year earlier. By contrast, higher priced Encinitas rose from only 32 sales to 34 year over year.

Helping right the market, the number of active listings on the real estate industry's local multiple listing service stood at 16,834 yesterday, down 17.7 percent from the same period last year and down for the fourth straight month, off 3.5 percent from September. That means the inventory of unsold homes is dropping faster than the addition of new listings.

Meanwhile, builders continued their yearlong pullback in construction, receiving permits for only 231 houses, condos and apartments in October, compared with 659 in October 2007 and 834 in October 2006. For the year to date, permits total 4,777, down from 7,445 in 2007 and 10,777 in 2006.

“Builders need foreclosures to burn off before it's going to make sense in a lot of markets to build again in the kind of numbers we're used to seeing,” LePage said.

That worries Lori Staehling, president of the San Diego Association of Realtors, who joined several other industry leaders yesterday in the first of a planned series of task force meetings over the next few weeks.

“Pricing in real estate is a matter of supply and demand,” Staehling said. “If we continue this situation where we're not building units that our population growth calls for, we'll be right back where prices escalate back up more than we would like to see because of the need for housing. Everything happening now will have an effect down the road.”

The private meeting was called by San Diego Mayor Jerry Sanders to search for local solutions to the continuing wave of foreclosures. Mayoral spokesman Darren Pudgil said actions under consideration include an educational outreach to distressed homeowners about options available. He said the City Council is scheduled today to authorize $9.5 million in federal funds to help some distressed owners.

James Hamilton, an economist at the University of California San Diego, said there are no signs that San Diego's housing market has bottomed out or turned the corner, heading for a recovery. He said the growing signs of a recession will only depress prices further, on top of the fallout from foreclosures.

“I'm guessing that the rest of the economy will lead housing out of the downturn, but we'll see,” he said.

Economists have been saying that the United States will likely face a recession through much if not all of 2009 and that housing won't begin recovering until 2010. Some feel San Diego's housing, which turned down earlier than in other major markets, may start to turn up by this time next year.

On the affordability front, the National Association of Home Builders said San Diego's improved standing was because of a reduction in median prices from $440,000 to $308,000 over the past year, while incomes have inched up from $69,400 to $72,100 over the same period.

The builders' Housing Opportunity Index is based on how many homes of all types sold that are affordable to households earning the median income and at prevailing interest rates for both fixed-rate and adjustable-rate mortgages.

While nearly 39 percent of San Diego homes sold were affordable in the third quarter, the New York City area was deemed the least affordable with only 10.6 percent of homes sold at a median $500,000 and within reach of the median-income household earning $63,000.

Four of the least-affordable markets were in California: San Luis Obispo, 13.4 percent; San Francisco, 16.6 percent; Los Angeles, 20.7 percent; and Napa, 23.2 percent.

Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.com

Still, the figures were interpreted as good news by Christopher Thornberg, an economist with Beacon Economics, who had been warning of bad housing markets ahead long before many other experts. Thornberg said sales of low-priced properties are attracting investors.

“That's a good thing, because these are the guys who will determine where the bottom is,” Thornberg said. “When they think prices have reached a point where they can buy stuff and rent it out and sell in three or four years and make money, they'll move in. This was never an if, it was always a when, and now it's starting to happen.”

He added, “It's the beginning of a recovery – it's not the recovery . . . There's a bottom ahead, we're not there yet, but it's clear we're coming in for the landing.”

Thornberg said he continues to believe the bottom will occur in mid-2009, followed by “substantial signs of economic growth” in 2010.

Delores Conway at the University of Southern California Lusk Center for Real Estate said the bottom is a “process, never a point in time.

“And we've been seeing that the market has been bottoming and it will continue probably into next year.”

She had been expecting the credit crisis to ease by mid-2009, but now thinks it might be delayed, possibly into 2010 because of the economic turmoil sweeping the globe.

Alan Gin, economist at the University of San Diego, predicts three more quarters of real estate gloom with the bottom occurring sometime in the second half of next year.

San Diego, which was one of the first regions to experience the housing downturn, had much company in the rest of Southern California in September, with sales up 64.6 percent to 20,497 but the median price down 33.2 percent to $308,500.

DataQuick President John Walsh noted that there could be more trouble ahead because the September figures do not reflect the turmoil of the last few weeks.

“Over the next few weeks our sales data will begin to show how the meltdown in financial markets this fall has impacted housing demand,” Walsh said in a statement.

Local real estate agents said for all the concern about the general economy, they are seeing more interest in open houses and multiple offers on homes being sold by banks that acquired properties through foreclosure.

The number of listings is dropping, according to the San Diego Association of Realtors – a sign of a more balanced market between buyers and sellers.

As of yesterday, there were 17,447 active listings, down 16.1 percent from year-ago levels and the lowest since April last year. At the current pace of sales, that represents about 5.6 months of inventory. Typically, a balanced market between buyers and sellers occurs when there is three to six months of unsold inventory.

Lori Staehling, president of the realty association, said that at an open house she held over the weekend in Rancho Bernardo there was never a moment when potential buyers weren't present.

Realtor Gary Kent said owner-occupant buyers outnumber investors and predicted the rest of the year may be more active than usual as buyers race to take advantage of favorable interest rates and conforming loan limits.

“I don't want to sound like a rah-rah agent, but I actually think it's very close to the bottom,” Kent said of the market. “It's hard to tell if the bottom has passed or we're ahead of it.”

Karen Wheeler at Coldwell Banker in Del Mar said the economic uncertainties worldwide are not weighing on everyone, particularly investors who are buying for the long-term.

“I think home buyers are concerned about life here and having a home,” Wheeler said. “That supersedes what they might be thinking worldwide on a more general scale.”

Roger M. Showley: (619) 293-1286; roger.showley@uniontrib.com

There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized – at least for the time being. More than 90 percent of new loans now are being made through the Federal Housing Administration (FHA) insurance program, plus Fannie Mae and Freddie Mac. FHA is owned by the federal government, and Fannie and Freddie are operating under federal conservatorship. All three have unfettered access to global capital markets at rock-bottom costs because their borrowings are fully guaranteed by the Treasury. Ginnie Mae, which is FHA's pipeline to the bond market, recorded an all-time high of $29 billion in new mortgage-backed securities issued in August.

Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance. FHA's credit standards are generous and forgiving – the agency exists to help people with less-than-spotless credit histories. Fannie Mae and Freddie Mac have raised their credit score requirements over the past year, but buyers and refinancers with scores in the upper 600s can still qualify for loans carrying reasonable rates and fees.

Despite the global financial system's quakes, mortgage rates not only remain low by historical standards but have actually declined recently. For the week ending Oct. 8, according to the Mortgage Bankers Association, average 30-year fixed rates dropped to 5.99 percent and 15-year mortgages averaged 5.71 percent. Freddie Mac said 30-year rates dropped to 5.94 percent.

Maximum loan amounts through FHA, Fannie and Freddie in high-cost local markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.

Home prices – pushed by foreclosures and short sales – have rolled back to 2003 and 2004 levels or lower in many of the former boom markets. As a result, growing numbers of buyers are coming off the sidelines, making offers and writing contracts. The pending home sales index jumped by 7.4 percent based on purchase contracts signed in August, according to the National Association of Realtors. The heaviest increases – pointing to higher closed sales in the coming two to three months – were in California, Florida, Nevada and the Washington, D.C., metropolitan area.

Housing and mortgage leaders say consumer worries about the stock market have obscured positive developments under way in real estate, where pricing pain and downsizing have been facts of the life for the past two-and-a-half years.

David G. Kittle, president and CEO of Principle Wholesale Lending Inc. and incoming chairman of the Mortgage Bankers Association, says “the mortgage market has never shut down” despite the global financial crisis. Money is “clearly available as long as you can qualify for it” with at least a modest down payment and decent credit history.

Matt Vernon, a national retail mortgage sales executive for Bank of America, said, “we've got more than enough liquidity” to handle mortgage demand. “We are open for business.” Most of the bank's production is now funded through FHA, Fannie and Freddie.

On the front lines, mortgage company owner Jeff Lipes, president of Family Choice Mortgage near Hartford, Conn., says “I don't think consumers really know how free-flowing capital is right now in the residential mortgage market. There are no shortages, no breakdowns. People ought to be aware of that.”

Bottom line: Scary as the news has been about stocks and banks, this is not the case for mortgages. Besides shopping at large national lenders, check in with local banks and credit unions who may be originating loans for their own portfolios – not for Fannie, Freddie or FHA. Many of them are healthy, have plenty of cash to lend, and may be surprisingly competitive on terms and rates compared with the big boys.

Kenneth R. Harney is a nationally syndicated real estate columnist with the Washington Post Writers Group. His e-mail address is kenharney@earthlink.net.

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