First up is some positive breaking news for the housing market. Shadow inventory of homes is declining, providing a dose of good news for the glum housing market. Shadow inventory, or homes on the verge of foreclosure, fell to 1.6 million units representing a five-months supply in July compared to 1.9 million units representing a six-months supply a year ago, according to CoreLogic. It’s a good sign that troubled homes, normally headed toward foreclosures, are getting sold faster. Lesser inventory will help stabilize falling prices on homes for sale. Of course we won’t be seeing a drastic change in numbers, but even a small percentage of troubled homes off the market is a blessing for sellers and the industry as a whole.

“The steady improvement in the shadow inventory is a positive development for the housing market,” CoreLogic Chief Economist Mark Gleming said in a press release. “However, continued price declines, high levels of negative equity and a sluggish labor market will keep the shadow supply elevated for an extended period of time.”

Housing Prices Increase, but not Enough

Some more indication of baby steps toward a market recovery. For the fourth consecutive month, home prices were on the upswing in July compared to the previous month. But the bump wasn’t good enough to give the market a clean bill of health, yet. According to data released by S&P/Case-Shiller Home Price Indices, home prices across 20 major urban areas in July remained flat when adjusted seasonally, and down 4.1 percent compared to a year earlier, despite showing a 0.9 percent gain. The trend of prices rising is a good sign, analysts said.

“With July’s data we are seeing not only anticipated monthly increases, but some fairly broad improvement in the annual rates of change in home prices,” said S&P’s David Blitzer, according to an AFP story. However, he said, “if you look at the state of the overall economy and, in particular, the recent large decline in consumer confidence, these combined statistics continue to indicate that the housing market is still bottoming and has not turned around.” Prices across the country were at the level of 2003, according to the report.

Mortgage Rates Continue to Slide

Here’s more music for the ears of potential homebuyers. Nudged by the Federal Reserve’s proposal to reduce borrowing costs, mortgage rates fell to the lowest in Freddie Mac’s recorded history this week. Rates on a 30-year-fixed loan hit an unimaginable 4.01 percent, down from 4.09 percent. On a 15-year loan rates dropped to 3.27 percent. The lucrative rates are aimed to lure consumers toward buying and refinancing their existing mortgages. Many are taking the bait. According to the Mortgage Bankers Association, there was a 9.7 percent rise in loan applications last week. However, a good section of consumers have not been able to take advantage of the rates because of stricter lending standards.

Existing Home Sales Drop

Some good news for buyers which turns out to be not-so-good news for sellers. Sale of existing homes dropped 1.2 percent in August, according to an index by the National Association of Realtors®. The measure shows that sales dipped to 88.6 percent in August from 88.7 percent the prior month. The data, which takes into consideration signed contracts but unclosed deals, shows that the numbers are higher when compared to the same period last year, but that’s hardly a consolation since last year’s showing was affected by the expiration of a federal tax credit for homebuyers. Lawrence Yun, NAR chief economist in a press release blamed the numbers on an uneven market.

“The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” he said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.” If you are looking to buy, now may be a time to get involved in the market, Paul Dales, senior U.S. economist for Capital Economics, told the Wall Street Journal. But, a lot of people have been unable to cash in on the situation, he said. Some analysts blame the job market and slipping consumer confidence. In these shaky times, many people prefer to rent than invest their savings on a new home.