Consumer expectations for U.S. home prices perked up in December, matching a modest fourth-quarter improvement in the U.S. economy, according to a monthly survey from mortgage market firm Fannie Mae.

For its December reading, Fannie Mae said survey respondents now expect home prices to rise by 0.8% over the next year, up from the 0.2% gain predicted in November.

Views on the direction of the U.S. economy also improved: 22% of respondents indicated a belief that the U.S. economy is on the right track, marking a 6-percentage-point jump from November’s survey.

On personal finances, 40% of respondents said they anticipate their personal financial situation to strengthen over the next year. Fannie Mae noted the response marks the first time since February that a larger share of respondents indicated they expect improved personal finances rather than finances that will remain the same over the next year.

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Have you heard the news?! Interest rates are at an all time low! Following the Fed's announcement last week, the national average rate on a traditional 30 year fixed rate mortgage has inched even lower to record numbers.

Rates are estimated in the mid 3% range for 15-year loans and low 4% range for 30-year loans. A successful refinance will bring qualified homeowners immediate savings in the form of reduced monthly mortgage payments, but more importantly, larger savings over the remaining term of their loan.

On another note, Uncle Sam is about to take a first tentative step out of the mortgage business by lowering the size of home loans that the federal government will guarantee, and it's already hitting California neighborhoods with higher costs and bigger down payments.

Current conforming loan limits are scheduled to expire Friday, Sept. 30.  The maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. 

The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.  Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

Most of the nation's biggest mortgage lenders have already stopped making loans at the old limits, concerned that they will not be able to get them off their books before the official Saturday October 1st deadline.

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Buying real estate continues to be cheaper than renting in San Diego as well as the vast majority of major U.S. cities, according to a quarterly rent vs. buy index from real estate search and marketing site Trulia.

According to the index, the cost of buying was less than renting in 37 of the 50 cities (74 percent) as of July 1, 2011. About the same share, 78 percent, favored buying over renting in Trulia's last index report.

Trulia defines total costs of homeownership to include "mortgage principal and interest, property taxes, hazard insurance, closing costs at time of purchase and ongoing (homeowners association) dues and private mortgage insurance, where applicable. It also includes an offset for the tax advantages of homeownership, including mortgage interest, property tax and closing cost deductions."

"Many aspiring homeowners are on the fence about renting and buying in today's market. Should they take advantage of falling home prices and low borrowing costs, or should they continue to rent until the economy stabilizes?" said Ken Shuman, spokesman for Trulia, in a statement.

Take a look at Trulia's Rent vs. Buy Index to see how buying San Diego real estate is cheaper than renting.

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Americans are closely watching market activity before the week's end, after the Dow on Thursday took a 500-plus point plummet. Analysts across the country have speculated how the volatility of U.S. stocks will affect (or already have affected) an anemic housing market.

The San Diego Union-Tribune spoke today with Richard Green on this very topic. Green directs and chairs at the Lusk Center for Real Estate at the University of Southern California(Green's responses have been paraphrased.)

Q: How will the stock market’s recent volatility affect the housing market in California?

A: I actually did a study on this though it's about 10 years old. The only place where this mattered was in the Bay. (Because of the area's start-up culture,) people there really depend on their stocks to have the ability to make down payments, even. How much people sold stock to make a down payment, in the north the share is higher than in Southern California. Long story, short: The impact will be seen in the Bay area. Down in our part, not so much.

Q: Some analysts suspect people may start pulling out of stocks and instead invest in real estate. Is that a sound theory?

A: Sounds like a good sales pitch...What's happened is the opposite. If the stock market went up, then investors start looking around for real estate to buy to balance their portfolio. To say that people will sell stock to buy houses, I kind of doubt that.

Q: Is the effect of the stock losses on the housing market more psychological then?

A: The market reflects psychology more than it draws it. People are in a bad mood for a good reason. GDP numbers were absolutely horrible. Job numbers were better than people were expecting. They still aren't great. And clearly we have a dysfunctional government. Congress approval right now is at 16 percent. So you put that together, people are in a lousy mood. I don' t think it's just the stock market.

Q: If market losses become long-term, what will that mean for real estate?

A: Oh, long-term. They will show the deterioration of wealth of the country. That can't be good for housing.

Q: Any positives?

A: Well, the 10-year treasury went down on Thursday. That's the only positive. That drove down mortgage rates. So if you qualify for a mortgage, then it will be cheaper.

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