With Incline Village home prices stabilizing and mortgage rates falling to historic lows, now may be the prime time for buyers to lock down a great deal on a new house. "We have record-low mortgage interest rates and great inventory on the market," says Walter Molony, spokesman for the National Association of Realtors. "It's hard to imagine a better environment for buyers if they have a steady income and good credit."

Unanswered Market Questions

Entering the last half of 2010, housing market experts are looking at several key questions, says Walter Molony of NAR.

Will the job market settle down? Only then will most consumers feel truly confident about making a purchase.

How will the shadow inventory of potential foreclosures affect the number of homes on the market? "The range of potential foreclosures is huge, with estimates from 1.7 million to 7.5 million houses in danger," Molony says. His organization puts it at around 2 million, and he notes that if banks bring the properties to market at a slow, steady pace, it may stave off a glut like the one that caused the recent downward spiral in home prices.

How will home prices trend? NAR expects prices will be flat and up just a few percentage points in most areas. "Again, it all gets down to the local economics in each market," Molony says.

Will banks relax credit restrictions? "Right now, it's a little tough to qualify for a mortgage," he says.

Will the shift in the composition of sales continue? "A year ago we had weak home prices because they were dominated by foreclosures," Molony says. Today, there's a better mix of normal sales along with foreclosures, which helps stabilize prices.

Buyers who act now, before home prices go higher and rates creep up, could save thousands in interest over the life of a loan. They can also get a fair price on a home they love.

Meanwhile, it's good news in a sense for sellers, too. Many have waited months and even years for potential buyers to darken the doorways of their homes that have been languishing on the market.

Yet the sputtering economic recovery and high unemployment rate has kept the housing market in a protracted slump. "Growth has been disappointing and not as strong as we expected earlier in the year," admits Molony. "We've been in unprecedented territory as far as the economy and housing market go. The housing market is in a state of flux."

Cloudy Forecasts, Silver Linings

Home sales forecasters have struggled. Most didn't foresee the free-fall in home values or the subprime mortgage debacle, which both contributed to the recession. And now, reading housing data and the mood of consumers makes forecasting tricky. "We're in a state of gray when it comes to forecasting," admits Maloney. "The housing market is doing OK, but growth has been disappointing and not as strong as we expected."

The Fannie Mae July Outlook forecasted a slowdown in housing activity during the third quarter of 2010 and a modest recovery in the housing market in the fourth quarter and into next year.

Despite the unknowns, several factors are contributing to creating a buyer's market.

Historically Low Mortgage Rates

Current rates as of Sept. 1, 2010, for a 30-year fixed mortgage hover around 4.5%, the lowest rates since Freddie Mac began tracking rates in 1971.

"From a buying opportunity, lower rates mean you may be able to afford or qualify for a more expensive home," says Diane Brooks of USAA Bank. "It's also a great time to refinance your home and lower your monthly payments."

Stabilizing Home Prices

NAR released numbers in August that showed signs of steadying home prices, a positive sign. "The broad trend is toward stabilization — a flat-lining in prices," Molony says.

That beats the steep drop in home values that helped spur the economic crisis.

NAR says the national median home sales price was up 1.5% for the second quarter compared to the same period last year. "We've had a big correction," acknowledges Molony. "We may have reached a bottom in home prices."

That may encourage first-time homebuyers who have seen the American dream of homeownership sour for the many who are underwater on their mortgage — meaning they owe more on the mortgage than the house is worth. "The typical sellers today have been in their homes seven years, and we've seen a net appreciation over the past seven years," Molony says. "Even if prices go down for another year or two in a particular area, the typical homeowner should be OK if they stay in the home for several years."

Regional Market Improvements

Many markets are offering a strong home inventory that is attracting buyers. NAR reported in August that existing-home sales were up substantially in the Northeast, South and Midwest, and though they fell in the West by 2.6%, they were up in that region 7.6% over the second quarter of 2009.

Homebuilders, anxious to sell newly built inventory, may offer incentives. The National Association of Home Builders reported a 23.6% rise in June sales of newly built, single-family homes, after a historic low in May, according to U.S. Commerce Department data released midsummer. The numbers "are an encouraging sign that new-home sales are coming back from an expected slow period that followed the expiration of the homebuyer tax credit program," says Bob Jones, chairman of the NAHB.

As builders try to sell new homes and sellers bravely put existing homes on the market, it all comes down to regional economies. Buyers and sellers need to research and understand their local real estate markets to understand if this is the right time to seize opportunities