We received an important indicator of where housing is headed last week, when new mortgage applications for home purchases and refinances suddenly surged as they hadn't in months.

Applications for FHA loans to buy houses were up by 10.4 percent. And overall home purchase applications jumped by 7.1 percent.

Meanwhile mortgage interest rates dropped to their second lowest level in nearly two decades, according to the Mortgage Bankers Association. Thirty year fixed rates averaged 4.96 percent and fifteen year rated dropped to just 4.5 percent.

Why's this important? New financing applications to buy homes obviously point to rising purchase contracts and closed sales in the months ahead. They also suggest that prices have hit a level in many markets that is attracting once-hesitant buyers off the sidelines.

There's still another factor that's likely at work here as well: Congress's recent improvements to the home purchase tax credit -- pushing it to $8,000 from $7,500 and making it non-repayable. George Ratiu, research economist for the National Association of Realtors, says the big jump in loan applications could be tied to the improved credit in the stimulus package signed into law last month.

"Consumers may be responding to the stimulation" effect of the better credit for 2009, he said.

But let's be clear here: A rise in home purchase applications does NOT suggest we've turned the corner in the cycle or have solved the multiple challenges facing markets around the country -- high foreclosure levels, continuing domination in some areas of REO and short sales, and continuing increases in the unemployment rate.

Even amid these problems, however, there are some hints of possible improvements ahead. For example, a new study by research firm Realty Trac and USA Today found that despite the constant headlines about record levels of foreclosures, the more closely you look, the more you find that those numbers are highly concentrated in a relatively small number of counties.

More than half of the nation's foreclosures in 2008, researchers found, were concentrated in just 35 counties in 12 states. You can guess where: California, Las Vegas, Phoenix and Florida.

But the really eye-opening finding: In more than 650 other counties, representing one fifth of all markets in the U.S., foreclosure numbers have actually declined since 2006.

Foreclosures are horrible no matter where they occur. But the fact is: Huge portions of the United States have NOT been seeing record foreclosures, short sales or even serious property value declines. They're doing better.

Published: March 17, 2009

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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, consmer 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.