Wednesday’s Newsday article reported that the number of closings on Long Island fell in March. Last month, there were 1,902 sales closings on Long Island, down 9.3% from February, based on data from Multiple Listing Service of Long Island. However, the number of contracts, or pending sales, in the month of March was up 38% from the previous month. MLSLI also reported that the median home closing price fell in Nassau County from $397,000 in February to $390,000 in March. In Suffolk County, prices stayed the same at $300,000.

Bankrate.com reported that, as of April 13, home equity loans averaged 6.95% nationally, a drop of three basis points from a week earlier. (A basis point is 0.01 of a percentage point.) The typical home equity line of credit had a rate of 5.55%, down one basis point from last week.

Reuters reported that applications for home mortgages fell to their lowest level in three months. The Mortgage Bankers Association released data on Wednesday that the seasonally adjusted index of mortgage application activity — which includes refinancing and home purchasing applications — fell 6.7% in the week ending April 8. It was the third straight week of declines and applications were at their lowest level since the week of January 21. The index of refinancing applications declined by 7.7% and applications for loan requests dropped 4.7%, according to the MBA.

The Wall Street Journal reported that the Securities and Exchange Commission is set to issue draft proposals requiring firms that package loans and other assets into securities to hold a portion of the credit risk on their balance sheets. The rules, mandated by the Dodd-Frank Act, will surely affect everything from car loans to mortgages. The law requires issuers of securitized assets to retain 5% of the credit risk on the theory that they will adopt more prudent lending requirements. Banks and financial institutions that meet certain conservative lending standards will be exempted from the risk-retention requirement.

Thursday’s Daily Real Estate News reported that a housing shortage is on the horizon which may propel construction of new homes. According to a survey of 41 U.S. cities by Metrostudy, 78,000 houses are either vacant and for sale or under construction, 25% below the levels of those in 2006. Between the decline in new construction and falling housing prices, demand will increase as a severe housing shortage take place, the survey says. This will mean a demand for more homes to be built.

Reverse Mortgage Daily reported on Thursday that a new industry study aims to change people’s attitudes when it comes to reverse mortgages. A study conducted by Reverse Mortgage USA finds that, through reverse mortgages, Americans could save billions of Medicaid dollars and help reduce the U.S. deficit. The study says that those who use reverse mortgages to pay for long-term care could save the government-funded Medicaid program $5 billion a year. This could be help reduce the budget — now at $1.6 trillion — in which 58% of the budget is slated for Medicaid, Medicare and Social Security. In addition, senior citizens ages 62 and over hold $2 trillion in home equity, which is untapped for long-term care costs; it is exempted for Medicaid eligibility limits and is usually projected against Medicaid estate recovery.

Good news and bad news for the housing market: The good news is that The National Association of REALTORS reported today that existing home sales in January increased 2.7% from the previous month. The NAR reported a seasonally adjusted rate of 5.36 million units in January, compared to the downwardly revised figure of 5.22 million units in December. In addition, last month’s figure was 5.3% higher than the January 2010 figure of 5.09 million units. This is the first time in seven months that existing home sales were higher than the previous year. (Existing-home sales are completed transactions that include single-family homes, townhouses, condominiums and co-ops.)

Now the bad news: The Commerce Department said new home sales in January dropped by 12.6% to a seasonally adjusted rate of 284,000 units, compared to 325,000 units in December. Meanwhile, the pending home sales index also fell, from 91.5 in December to 88.9 in January. The drop in home sales could be attributed to tighter credit, high unemployment and declining consumer confidence, despite the tax cuts that went into effect this year.

Economists in a Reuters poll predict that home prices will fall by 2.3% in 2011 and then begin a slight recovery next year. Many see a rise in distressed home sales and foreclosures as the reasons for the drop in home prices. Distressed home sales hit a one-year high of 37% of all existing home sales, according to the Reuters article.

A recent Bloomberg article quoted Alabama Republican Congressman Spencer Bachus as saying a bill to overhaul Freddie Mac and Fannie Mae should be done “within three to four months.” The bill calls for Fannie and Freddie and the rest of the $11 trillion U.S. mortgage market to be weaned from its reliance on the federal government. However, the Washington Post reported that Treasury Secretary Timothy Geithner said reducing the federal government’s role will adversely affect the housing market as the costs will be passed on to the taxpayers.

During an economic update at the International Builders’ Show in Orlando on January 12, David Crowe, The National Association of Home Builders’ chief economist, said that projected single-family home starts are expected to rise by 21% in 2011, reaching 575,000 units. Crowe cited an improving economy and job market, which means more homes will be built in 2011, with this upward trend continuing into 2012. The biggest challenge is the access to capital smaller builders might not have because of stricter lending requirements.

Lawrence Yun, chief economist of the National Association of REALTORS, painted a rosier picture. On December 30, Yun projected 716,000 housing starts this year. Like Crowe, he sees a better outlook for the economy and the job market. He sees an additional 2 million jobs in 2011. If the strict lending requirements are loosened with safe underwriting standards for creditworthy buyers, Yun said, there would be a bigger boost to the housing market and more economic benefits.

Yun said the growing population is also the reason why housing starts will jump this year. The U.S. population has added 27 million people over the past 10 years. A growing population will spur home construction and sales.

Edward Sullivan, chief economist of the Portland Cement Association, had the lowest estimate at 492,000 new housing starts. He said at the International Home Builders Show that he does not expect a significant increase in housing starts until next year due to tight lending standards, a high home inventory count and unstable housing prices. He also said that new home construction in the U.S. will vary by region.

This “shadow inventory” has increased by 10% during the past year to an eight-month supply at the current rate of home sales, according to the CNNMoney.com article. Based on data from CoreLogic, the total housing market supply went from 6.1 million units in August 2009 to 6.3 million units in August of this year. At the current sales rate, it would take 23 months to go through the entire visible and shadow inventory of homes. That’s 3-4 times the normal rate of 6-7 months.

Mark Fleming, CoreLogic’s chief economist, said the additional supply raises the risk of further declines in home prices. In addition, many banks have been delaying the foreclosure process because they already own so many homes as it is. Realty Trac spokesperson Rick Sharpa said banks aren’t pushing borrowers too quickly to foreclosure so they don’t have to repossess homes that will take a long time to sell. It’s better for banks to allow borrowers to stay in these homes, maintaining the property and protecting them from vandalism rather than leaving them vacant in a weakened market for months.

Long Island was 19^th overall as being the nation’s riskiest housing market. The factors that PMI took into effect were higher unemployment and foreclosure rates, excess housing supply and more volatile home prices. The riskiest market was the Miami-Miami Beach-Kendall, Florida area, REALTORMag.com reported.

PMI also determined the probability that home prices would fall within the next two years. According to PMI, there was a 91.5% probability that home prices in the Nassau-Suffolk area would see a decline in the next two years.

As stated before on this blog site, the job market will dictate what the housing market will do. Right now, more people are filing jobless claims, job creation is at a crawl and some local corporations are relocating off the island. Also, with the tax deductions for mortgages possibly being eradicated at the beginning of next year, that might mean even more foreclosures here on the island and increase the chances that home prices will fall even lower.

But there’s no reason to panic just yet. The New York State Labor Department’s recent report shows the unemployment rate for July holding steady at 8.2% and Long Island’s at 7.2%, which is higher than last month, but far below the national rate. The NYS Labor Department also said that 8,600 private-sector jobs were added to Long Island last month.

The Census Bureau further reported that 3.7 million homes were vacant in the second quarter of this year as the result of foreclosures, up from 3.5 million in the first quarter of 2010. Two million empty homes were for sale in the second quarter.

In Q2 2010, a record 269,962 homes were seized as homeowners went into foreclosure, according to a report from RealtyTrac. The California-based data company goes on to say that foreclosures will probably top the 1 million mark before the end of the year.

More bad news: the Mortgage Bankers Association report from May 19 showed a record 4.6% of mortgages in foreclosure and 14% as the result of foreclosures and home loan delinquencies.

The economy and the elimination of the federal tax credit could be attributed to the decline in home ownership. It’s been said that owning a home is the American dream, but that dream has since become more unattainable.

The Homebuyer Assistance and Improvement Act of 2010, sponsored by U.S. Congresswoman Kathleen A. Dahlkemper of Pennsylvania, would extend the eligibility for the first-time homebuyer tax credit until the end of September for those who entered into a binding contract to purchase a home before May 1. The House of Representatives passed the bill on June 29 by a vote of 409-5, and the Senate unanimously approved the bill the following day.

According to CNNMoney, some lawmakers in the Senate expressed concern about the economic impact of the bill when it was attached to the jobless benefits bill. Dahlkemper’s bill was removed from the jobless benefits bill and voted on as a standalone bill. In her bill, Dahlkemper cited data from the Congressional Budget Office that the immediate economic impact would be a 19% net increase in the federal deficit for 2010, but a 20% net decrease over the next five years.

When the original deadline for the federal tax credit was extended from November 30, 2009 to June 30, 2010, many homebuyers rushed to take advantage. However, the buying frenzy caused a backlog in paperwork and lenders were unable to complete the sale before the end of June.

The National Association of Realtors supported the extension because the organization feared that the homeowners would be denied the tax credits they deserved. Most of the transactions were short sales, which are more complex and take longer to close. The NAR has worked with congressional leaders in supporting passage of the legislation, saying the bill would provide more stability to the residential real estate market.

Citing the expiration of the federal homeowners’ tax credit and concerns about unemployment figures, many people have put off buying a home, according to the Post. The National Association of Realtors reported that existing home sales were down 2.2% in May from April and government data revealed that new home sales fell by nearly one-third in the same time period.

Meanwhile, the Mortgage Bankers Association reported that mortgage applications for home purchases have fallen for six of the last seven weeks. Mortgage applications in May dropped 30% from April, when people were scrambling to become eligible for the federal tax credit.

According to the Bureau of Labor Statistics, the unemployment rate for the month of May was 9.7%. The numbers do not take into account those who have stopped looking for work or those who have been out of work for more than six months. With job growth nowhere in sight, people are reining in spending and holding off on buying a home, no matter how low mortgage rates are.

One piece of good news: Existing home sales in New York rose nearly 5% as more buyers closed on their sales before June 30 in order to become eligible for the federal tax credit. Here in New York, existing home sales have gone up for the last three months. The New York State Association of Realtors expects this trend to continue throughout the summer.