Folks in the market to buy real estate haven't seen such good opportunities in years. In some pockets across the United States, dollars can buy almost twice the house they could have purchased a couple of years ago. And it's not just domestic buyers who are reveling in this market — foreign investors are also scooping up bargains.

Miami, Phoenix, and California are among the hardest hit regions, with experts expecting more price cuts to come.

Although the price is right for many real estate buyers and investors, it's not all a cake walk, since lenders are making loans much harder to get.

According to an April report from the Federal Reserve, nearly two-thirds of the banks they surveyed imposed tighter lending standards on traditional or prime mortgages, as well as non-traditional loans, such as those that require limited income verification. The survey also reported that just nine banks are still making sub-prime loans.

Borrowers shouldn't expect much relief anytime soon, as foreclosure rates are still climbing. More than 156,000 families have been booted from their homes since the beginning of this year. Foreclosure rates are up 112% from January to March 2008, which will cause the banks to further tighten lending standards. Housing pundits expect foreclosures to continue to grow, since they estimate as many as 1.8 million adjustable-rate mortgages will reset this year. Those increased payments will push even more homeowners into default.

Right now, some 18% of homes for sale have mortgages larger than their current market value, or what lenders call negative equity.

It's obvious that the housing crisis is not going to be able to resolve itself without some kind of government intervention. The news just seems to worsen:
 

• According to the National Association of Realtors, existing homes sales fell for the seventh time in eight months, by 2% in March, to 4.93 million units.
   
• Prices are still declining, with the median price dropping 7.7%, to $200,700, in March.
   
• Rates of foreclosure have increased in 46 states, with the Southwest – Nevada, Arizona, and California – the hardest hit. But Florida, Colorado, Georgia, Michigan, Ohio, Massachusetts, and Connecticut are not far behind. Dean Baker, co-director of the Center for Economic and Policy Research, announced that before the crisis is over, homeowners may see as much as $6 trillion lost in their home values since the top of the market in June 2006.
• Zip Realty, a California-based real estate broker, reported that home inventories grew 3.5% last month in the 29 major markets that the company tracks, and were up 6% over the same period last year. Because of the slowdown in sales, builders are also cutting back their production of new homes, which have fallen almost 60% year over year.
• The Census Bureau reported that 2.9% (2.28 million) of the homes in this country – not counting rental properties – were unoccupied and for sale in the first quarter. This is the highest quarterly number recorded since 1956.
• Mortgage applications declined by 11.1% during the week ending April 25, according to the Mortgage Bankers Association, and its application index fell to 567 – considerably off its high of 1,856.7 during the week ending May 30, 2003.

The good news is the Fed is stepping up its efforts to prevent even more calamity. Chairman Bernanke announced that the Fed is taking an active role, helping community groups to purchase and renovate vacant properties in their areas, providing encouragement to financial institutions to help at-risk borrowers, and creating new lending standards to stop abusive lending practices.

Additionally, Congress is finally putting its collective heads together to try to come up with some homeowner relief. House Financial Services Chairman Barney Frank's foreclosure-prevention package passed the House, but faces uncertainty in the Senate and a possible veto by President Bush. The bill calls for lenders to cut troubled debt to no more than 85% of a home's current appraised value, with the FHA covering the rest of the principal owed by the homeowners if the loan goes into default. The high cost of the program – an estimated $1.7 billion, by the Congressional Budget office – substantially reduces its chances of clear sailing.

But homeowners may fare better under programs undertaken by their individual states. In Pennsylvania, a moratorium was placed on foreclosure auctions in April, and the state saw foreclosure filings drop 24.4%. Don't be surprised to see other states go this way as they tire of waiting for federal relief.

For the homeowner, the current economic scenario is not pleasant, and those who don't have to sell their homes may be better off just biding their time, waiting for better days ahead. But if you are in a situation that requires selling your home, there are a few things you can do to maximize your selling price and minimize your home's time on the market.

First, make your home as presentable as possible. That means clean and declutter it, apply a fresh coat of paint inside and out (neutral colors, please!), and keep your yard mowed and weeded. I would not advocate spending a lot of money on renovations, as you will most likely not get your money back. But if major repairs are needed, it's best to do them before you list your home, as they will be a real turn-off for potential buyers.

Next, find the best realtor in your area. Ask about their marketing efforts – just putting an ad in a homes magazine and/or newspaper won't make your home stand out above the competition. They should have additional marketing programs, such as active websites, professional virtual tours, open houses, and direct mailings to prospective and interested buyers.

And lastly, be realistic about the price at which you list your home. Prospective buyers don't care what you "need" to get out of your home. Buyers will most likely be able to choose from scores of homes that will be similar to yours and that will meet their needs. The deciding factor will be the price, and the best price for the same or similar amenities will win out in this market.

As for investors, most experts don't think the market has yet bottomed out, so if you do invest, plan on holding the property for awhile. The "flipping" days are gone for now. Instead, you might want to consider looking toward the commercial markets, in the form of real estate investment trusts, particularly in the medical field. The baby boomers are not getting any younger and the demand for quality care and housing is driving the health and managed care sectors. And we'll talk more about that in future issues.

For now, plan to ride it out, and know that housing – just like stocks and bonds – is a cyclical animal. Speculation always takes any market far above and beyond its realistic equilibrium, and a downturn naturally follows. Good times will return, but I wouldn't expect a replay of the past few boom years for quite some time. Instead, it looks like the stock market is beginning its bounce back and that, not real estate, may be the place for your investment dollars in the near future.