Carol Sheehy

By Stephanie Armour, USA TODAY

Housing reports out Tuesday show the first glimmers of stabilization in the troubled housing market, but economists say there are still significant risks that could undermine a recovery.

Home prices fell at a slower pace for the fourth straight month in June, with prices in 20 major metro areas down 0.5% vs. a 0.9% drop in May. While the numbers are still falling, they are far less than the 2% monthly drops seen earlier in 2008, according to the S&P/Case-Shiller index. And in June, nine of the 20 metro areas showed a gain, up from seven in May.

"The bottom of the national housing market is in view," says Mark Zandi, chief economist and co-founder of Moody's Economy.com. "The rate of (price) decline is slowing and there are signs of stabilization in some markets." But troubles persist. The decline in home prices remained in the double digits, with a record 15.4% drop in the second quarter of 2008 vs. the second quarter of 2007.

Other data released Tuesday also showed the market remains weak. In July, sales of new homes were at a seasonally adjusted annual rate of 515,000. That rate is up 2.4% from June, but 35% below the July 2007 sales rate, according to U.S. Department of Commerce.

Also on Tuesday, the Office of Federal Housing Enterprise Oversight reported that home prices were 1.4% lower in the second quarter of 2008 compared to the first quarter, and down 4.8% from a year earlier. OFHEO analyzes prices nationwide for residences financed through Freddie Mac and Fannie Mae.

Still, economists remained generally upbeat about the reports, noting several factors suggest the worst may soon be over.

•Home prices are falling, but the rate of decline is easing.

•Some regions in the USA are seeing home prices rise again. Those areas include Denver, Boston, Charlotte and Dallas. Prices were up in some areas 1.5% from May to June.

•Sales of existing homes are rising.

"The housing market is weak on one hand, but we are in the process of hitting bottom. That's the true story," says Joel Naroff, president of Naroff Economic Advisors.

But any recovery is perilous. Inventories of unsold homes are still high, which could drag down prices. Mortgage rates have risen, and some economists say that those rates could hamper any turnaround unless the Treasury Department steps in to inject new capital into mortgage giants Freddie Mac (FRE) and Fannie Mae (FNM)— a move that may cause rates to decrease.

In addition, lenders could continue to maintain tightened credit standards or clamp down even more, hampering the ability of potential buyers to get loans. Other variables include the job market and what happens with oil prices, all factors that play into buyer confidence and the ability to afford a home.

But, in light of recent housing reports, economists such as Brian Bethune now say it's a good time to buy.

"The evidence is starting to accumulate that things are starting to turn around," says Bethune, an economist with Global Insight. "A number of major metro centers are showing signs of stabilization, and that is positive news."

S&P/Case-Shiller home price indexes