The economy's messages for real estate in the past week have been just about as mixed as you can get.

On the one hand, mortgage rates dropped to their lowest levels in more than two years. Anyone with reasonably good credit and a downpayment can now qualify for a 30-year fixed rate loan for 5 percent … and a 15 year loan for 5 percent, according to the latest survey from the Mortgage Bankers Association.

These low rates, in turn, are stimulating a giant, end-of-the year rush to refinance-and should help pull at least some previously reluctant home buyers off the side lines and into serious shopping mode.

Also on the plus side: Big job growth numbers -- 189,000 new private-sector payroll jobs came online last month, far beyond what Wall Street analysts expected.

Add to that an impressive jump in U.S. employee productivity -- up by 6.3 percent in the third quarter, the largest increase in four years according to the Bureau of Labor Statistics -- and you've got a picture of a strong and growing national economy. It's a solid building block for real estate's long-awaited turnaround.

But there's a sobering flip side to all this: The national delinquency rate for U.S. home mortgages increased to 5.6 percent of all outstanding loans in the third quarter. That's the worst rate since 1986, according to the Mortgage Bankers Association.

The percentage of homes in the foreclosure process also rose -- to 1.69 percent -- the highest ever in the delinquency survey's history, which extends back to 1972.

There is no way to see the delinquency and foreclosure numbers as anything but grim. Perhaps the only spark of good news on this front came last Thursday, when Treasury Secretary Hank Paulson's plan to stimulate rapid, private sector relief for hundreds of thousands of financially-distressed subprime borrowers was unveiled.

The mortgage and bond industries estimate that this voluntary, non-governmental effort, including five-year interest rate freezes for between 350,000 and 600,000 borrowers heading for delinquency and loss of their homes-should sharply cut the foreclosure rate in the coming months.

That should relieve pressure on unsold real estate inventories, stabilize prices in some neighborhoods, and help local real estate conditions in dozens of local markets across the country.

Published: December 13, 2007

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.