Home sales and prices throughout most of the country will improve in the second half of 2008, and the recovery will vary by the local market, Lawrence Yun, chief economist for the National Association of REALTORS® said during NAR's Midyear Legislative Meetings & Trade Expo.

Middle-America cities that performed evenly over the past few years - like Cincinnati, Milwaukee and the Kansas City, Mo., area - are likely to experience home price gains in the 20 to 30 percent range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent during that time period, Yun said.

Yun blamed most of the softening of the housing market over the last year on the "subprime mess," where consumers with poor credit records got loans they couldn't afford when the interest rates reset to higher levels.

"In fact, if you look at where home prices fell the most, it's the markets where subprime loans were prevalent," Yun said..

Yun said. "While much of the media is focusing on the fact that the rate of foreclosures doubled this year from historic averages, the foreclosure rate has gone from 1 percent of all homeowners with mortgages to 2 percent. Foreclosures are being driven principally by subprime loans."

Yun further explained that more than half of today's foreclosures are concentrated in the subprime market. The majority of homeowners are making their mortgage payments on time.

Bottom line --  the subprime market has dried up, and loans insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac are making a comeback, the housing markets will strengthen and prices will begin a steady uptick in the coming months.

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