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KAI RYSSDAL: Part of the government's economic turnaround plan looks like it's taking hold. The Federal Reserve's been buying up long term Treasury bonds as a way to drive interest rates down. Judging by what Fannie Mae and Freddie Mac have to say, it's paying off. The mortgage giants reported this week refinancings doubled last month as homeowners looked to cut their payments. The calendar this time of year traditionally gives the housing industry another boost. Typically this is the busiest home buying season of the year. But typical doesn't mean much right now. Alex Cohen hit some open houses here in Southern California.
Alex Cohen: This three story townhouse in the neighborhood of Santa Monica is so close to the Pacific Ocean, you can hear the seagulls. Officially it's a two bedroom but, says realtor Melissa Improta, with the upstairs loft, it's almost like having a third room.
Melissa Improta: Definitely enough room up here to be a playroom, to be an office. You have sliding glass doors that lead out to your own private roof deck, and then you have a French door over here.
Not long ago hardly anyone showed up to open houses like this one. Back then this property also might have cost a million dollars.
Today it's listing at $849,000 and potential buyers started showing up a half hour before the open house began. Among them, Brenda Wrenschler.
Brenda Wrenschler: The interest rates are going down, and I just kind of want to start the process of looking for a home.
Brenda's friend, Alexandra Nicole, is also looking to take advantage of mortgage rates that have dropped below five percent. She's wanted to buy in this neighborhood for a long time, but didn't even consider looking until now.
Alexandra Nicole: It's the first time anything has started to drop in this area. So it's not going to be condos and town homes for over a million because nobody's going to be able to do that these days -- it's just not happening.
It's just not happening in a lot of places anymore. Realtor Melissa Improta.
IMPROTA: Sellers I think have finally realized that it's a buyer's market. And that there's not a whole lot they can do about it.
Minerva Cornelio: We know that this is not the time to be looking for that big 'I'm going to cash in on my house and get that equity going.' You know, it's just a tough market.
Minerva Cornelio and her husband Jonathan recently sold their home in Burbank, Calif. for $449,000 -- that's $16,000 less than they bought it for in 2004.
The Cornelios have accepted that loss. They do need more room for their two young kids and soon they'll be moving into her parents' former home, which has more space. Still Minerva can't help but remember when they almost sold their 1,100 square foot house a couple years ago. That's when houses in her neighborhood were going for $600,000.
CORNELIO: And I wish -- I'm kicking myself for that right now. You know, we should have done that two years ago, and we could be shopping for a bigger home right now.
It's easy to get distraught in today's market no matter which side of the deal you're on says Lois Vitt. Vitt wrote a book about the psychology of home buying and selling.
Lois Vitt: It's scary. We have people with decision paralysis who are afraid to go out on a limb.
That's why the federal government is giving a bit of a push. As part of the stimulus package, anyone who hasn't owned a home in three years can get an $8,000 tax credit to buy a house.
Patrick Newport: We've had a string of positive good news over the last six weeks.
And that's encouraging after months of dismal reports says Patrick Newport an economist with IHS Global Insight.
NEWPORT: Housing permits and housing starts were up, existing home sales were up, new home sales were up and all of these increases were far greater than the consensus projection.
Newport says a few more rounds like that, perhaps buyers and sellers will finally believe they've seen the bottom.
In Los Angeles, I'm Alex Cohen for Marketplace.