As home prices continue to weaken, more and more homeowners are facing the real possibility that their homes will wind up "underwater" before the market starts to rebound. Of all the areas in the country that are facing tough times, the worst of times are being felt in the California city of Mountain House.

So what exactly does it mean to have your house underwater? Simply put, a mortgage goes underwater when the balance a homeowner owes on his house is more than the house is worth.

Just how bad has the situation gotten in Mountain House? The figures are staggering. According to figures released yesterday, roughly 90% of all homeowners in Mountain House are now facing mortgages that are underwater. Nine out of every 10 homeowners woke up this morning facing the fact that their home values have been in free fall and there is little that they can do to correct the current situation.

The decline in U.S. home values continues. Home prices in 20 top U.S. cities declined at the fastest pace ever, on a year-over-year basis, as foreclosures increased and banks sought to unload homes by selling at cut-rate prices.

Home prices in a 20-city sample plunged 16.6% in August, on a year-over-year basis in, according to the S&P / Case-Shiller U.S. National Home Price survey (pdf). The index has fallen every month since January 2007. Further, prices in a 10-city survey plummeted a record 17.7% in August on a year-over-year basis.

Economists surveyed by Bloomberg News had expected home prices in the 20-city Case-Shiller index to decline 15.9-17.1% in August on a year-over-year basis.

Large price declines in western U.S.

The areas with the largest annual percentage declines were: Phoenix, -30-7%, Las Vegas, -30.6%, Miami, 28.1%, San Francisco, -27.3%, Los Angeles, -26.7%, San Diego, -25.8%.

Not one Top 20 metro area experienced a year-over-year increase in home values as of August and only two cities saw an increase in home prices in the month of August: Cleveland, 1.1% and Boston, 0.2%. Prices in Denver were flat in August.

I have been writing a lot lately about all the negative indicators that we see coming out of the housing market, so it is nice to have some positive news to discuss today! The good news comes from the Commerce Department, which announced that sales of new homes in September rose by an unexpected 2.7%.

While any rise in home sales is reason to celebrate, the jump in September is much sweeter since analysts had been planning on actually seeing a drop in the month.

On the other side of the coin, one of the main reasons why we saw such a nice jump in sales during the month could be related to the continuing decline in home prices. During the month, the median price for new homes sold was $218,400. This figure is the lowest that the market has seen since all the way back in September 2004, and marks a 9.1% drop from the same month last year. Not the best of news for homeowners out there that are already concerned about their falling home values.

Some more bad news regarding the real estate market today, as we get the numbers for foreclosures in the third quarter, and see that the foreclosure rate actually jumped by a massive 71% during the quarter.

During the period of July through September, the number of households that received at least one foreclosure notice was 766,000. This marks a huge increase of 71% when compared to the same period last year. This data came available today from the foreclosure listing agency RealtyTrac Inc.

Just how bad has the situation gotten? Well, according to RealtyTrac Inc., before the end of this year, nearly one-third of all the houses listed for sale in the country will be foreclosures, which they are now estimating will reach the one million mark. Pretty scary figures.

With all the negative news that we have seen lately, it's nice to hear one piece of positive news regarding the housing market. We got that today on news that pending home sales rose unexpectedly in August.

The National Association of Realtors tracks home sales in its index, and reported today that its pending home sales index rose from 87 in July up to 93.7 in August. Going into today's report, analysts had been expecting to see the index actual fall, and were thinking that we would see the number drop down to 86 in the month, so the increase was definitely a bit of good news in an otherwise rocky market.

The areas of the country that saw the best jump in July were the same ones that have been beaten up the most over the past year, including California, Nevada, Florida, and Arizona.

As Washington tries to come up with an agreement on how to solve the current economic crisis, we received more information today on just how bad things are getting, as figures show new home sales were very weak during the month of August.

As the credit crunch and falling home values continue to apply pressure to an already weak housing market, the Commerce Department announced today that new home sales in August fell by a sharp 11.5% in August, resulting in a seasonally adjusted sales rate of 460,000 new homes. To find the last time we saw a rate this low, we would have to look all the way back to January of 1991.

As always, Wall Street likes to compare actual numbers to estimates. Had economists been expecting to see a 10% or greater drop in new home sales, that would be one thing, but that was not the case. Going into today's report, economists were expecting to see new home sales fall, though not nearly the 11.5% actual rate, but a much smaller drop of only 1% in the month. So today's reported sales figures are definitely going to add to the confusion that many are feeling regarding the housing market.

More bad news for the housing market today, as the Federal Housing Finance Agency announced that home prices in July were 5.3% lower than they were in July of last year.

The main culprits leading to lower July prices are, as usual, the large supply of homes available, tighter lending standards, and record foreclosures, that have resulted in sellers slashing prices in order to sell their properties. On a month to month basis, prices fell 0.6% from June to July of this year.

The drop in prices was seen universally in all regions. The only area of the country that saw prices rise on a year over year basis was the West South Central regions.

The credit crisis over the past year has already claimed a couple big name companies, and prompted the Bush administration to suggest a $700 billion bailout for the financial industry.

Today's housing news on new home sales in July sounds eerily similar to the post I wrote yesterday about July existing home sales. In both cases, we are given a quick headline that sounds like good news, but once you dig into the details a little deeper you realize that the news is just not as pretty as it first sounds.

Let's first take a look at the positive headline: New home sales rise in July. Great, this is exactly the sort of news that the market needs to hear. After all, weakness in the housing market has been a major catalyst to the current economic slowdown, so any good news is like a breath of fresh air. During July the market saw a jump of 2.4%. Not too shabby.

But what does this really mean?

As the housing market continues to struggle, there is further evidence today that things have yet to turn around as mortgage applications last week fell to lows not seen in nearly eight years.

Today's data came from the Mortgage Bankers Association, which showed that its application index dropped down to 419.3 last week, its lowest level since all the way back to December 2000. Just since this past February the index is down by 61%.

For those of us who are anxiously awaiting any positive signs for the housing market, this week has proven to be anything but hopeful. Today's news comes on the heels of data yesterday that showed new home construction during July was at its lowest levels in over the past 17 years.

Chances are, if you follow the economy at all, there are two things on your mind, oil and housing. Despite a couple days in a row of oil selling off, it seems like high oil prices are here to stay for a while. And housing continues to remain weak, with signs pointing to more weakness in the months to come.

I am sure you are as sick of hearing about homes sales as I am, but unfortunately it is something we have to look think about, and today we get more bad news, as the National Association of Realtors announced that May was yet another tough month for pending home sales. In fact, with a reported 4.7% drop in pending home sales, May was the third lowest month on record, a sign that tough times are still here, and probably going to be sticking around for a while longer.

First, let's get a better idea of what exactly we are talking about here. What are pending home sales? Simply put, a home sale is pending when there has been an offer made and accepted, but the deal has not yet closed. The lag between the acceptance and the closing is typically one to two months. The index to track this was started back in 2001, so to get to a 100 rating, you would have to have the average level of sales activity that we were seeing back in 2001.

With oil at $135 a barrel - up 463% since January 2001, Washington wrings its hands and says there's nothing it can do to lower the price. I think that's nonsense. There are two things that Washington can do today to get the price down: raise interest rates and close the swaps loophole.

What is the role of speculators in the price of oil and other commodities and what should be done to get those prices down? Some argue that oil prices are set by supply and demand. But if that were true, oil would drop because global demand is forecast to grow 1.2 million bbl/day -- and demand in the U.S. is down 300,000 barrels a day -- while global supply is expected to rise 2 million bbl/day.

Perhaps sixty percent of trading volume in oil is due to speculators -- these traders bet on a declining dollar and a rising price of oil. Raising interest rates would help lower the value of the dollar which has lost 70% of its value relative to the Euro since January 2001. Our Fed Funds rate fell from 5.25% to 2% since last August whereas in Europe, their rate is 4% and expected to rise. This difference makes Euros a more attractive currency for investors. So if the U.S. raises interest rates, people will start to buy dollars instead.

April saw a 65% increase in foreclosures from the same month a year ago.

The numbers pretty much speak for themselves, with 243,353 receiving notices in April. This is a vast increase from April 2007, when "only" 147,708 homes received the same notice. This was also a 4% increase from March. The numbers are based on a report from RealtyTrac Inc.

Homeowners in California and Florida are among the hardest hit. The two states had 9 metropolitan areas that ranked in the top ten areas of the country in terms of foreclosures.

Luxury homebuilder Toll Brothers Inc. (NYSE: TOL) stated that it was still looking for the light at the end of the tunnel when it reported preliminary first quarter earnings, which marked the seventh straight quarter of declining revenues.

During the quarter, the company had a 22% drop in revenues from the same period last year. The company is getting hit from a couple of different angles including falling home prices. On top of that, the average number of canceled home orders has also been on the rise. Finally, the company reported that the number of signed contracts dropped 46% from the same period last year.

Across the nation, Toll is seeing weak conditions in most areas, and expects the current challenges to continue for some time. The company compared the current situation to that of the Titanic, "things don't turn on a dime". Interesting comparison for the company. When companies start to compare their industry to the fate of the Titanic, you really have to start to wonder just how bad things have gotten, or are about to get. It definitely doesn't paint a pretty picture if you ask me.

Shares of the stock are down about 1% this morning in the premarket. The company is due to report complete first quarter numbers on February 27.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.

Home price depreciation accelerated in November, with prices falling in all 20 cities surveyed by the Case-Shiller Home Price Index, survey officials announced [pdf] Tuesday.

Prices fell a record 2.2% in November 2007, and 7.7% in the past year. Just as ominous, home prices fell in all 20 cities in November 2007, and prices in the last three months fell at a 16.2% annual rate. In addition, the survey's original 10-city index fell 8.4% in the past year.

Miami recorded the largest price decline, down 15.1%; followed by San Diego, down 13.4%; Las Vegas, down 13.2%; and Detroit, down 13%.

A tell-tale stat

Economist Steve Affinito told BloggingStocks Tuesday the Case-Shiller data is yet another tell-tale statistic regarding the condition of the U.S. housing sector.

For the first time in the last 13 years, new home prices marked a quarterly decline during the third quarter. In news that is sure to raise more concerns over the troubling housing market, a new government report showed that new home prices dipped by 0.4 percent between July and September.

While prices fell in the quarter, they were still slightly higher from the third quarter last year. When compared to the same period last year, prices were only 1.8 percent higher. This is the smallest one-year increase since 1995.

The report stated that there are still some pockets of the country that are seeing robust price appreciation, but the price weakening is now being experienced in a "significant portion of the country," with prices dropping in 20 states.