KB Home (KBH) reported first-quarter earnings Tuesday morning. The homebuilder said its loss came in at 71 cents per share. A year ago, KBH lost 75 cents per share. While the quarterly loss was less than last year's, it was larger than the Street's expected loss of 42 cents per share.

Quarterly revenue fell to $264 million from $307.4 million a year ago. Not only was revenue worse than a year ago, but it also missed expectations for revenue of $277 million.

Put this one under the the category of 'a half-loaf is better than none.'

Senate leaders are apparently poised to extend the $8,000 federal tax credit for first-time home buyers, Bloomberg News reported Monday.

However, the extension will not please all in the housing sector, as the Senate is working on a plan that would extend the credit, which expires November 30, for homes that close before April 1, 2010. The credit would then be reduced to $6,000, then $4,000, then $2,000 for homes that close in each successive quarter, until the end of 2010, at which time the credit program would end.

Existing homes are starting to move again. Last month, home resales hit their highest level in more than two years, thrashing expectations. The 9.4% increase in home resales -- which entails a seasonally adjusted rate of 5.57 million -- is attributed largely to the deadline for the first-time home buyer tax credit.

According to the National Association of Realtors, the annualized, seasonally adjusted rate is up from the 5.1 million in August and far ahead of the 5.35 million expected for September (based on economists surveyed by Thomson Reuters).

The housing market got two pieces of bad news Friday. The first being weaker-than-expected earnings for KB Home (NYSE: KBH) and the second being a less-than-expected rise in new home sales last month.

First, the good news. New home sales did rise last month. In the current economic environment, that by itself is good news. Unfortunately the rise was less than analysts had been expecting to see.

July was a good month for new home sales, which saw an increase of 9.6 percent during the month.

Before we look at the good news, let's cover the bad news first. Even with the jump in sales in July, new home sales are still well below their peak four years ago. In fact, new home sales are 69 percent below their peaks when the housing market was at its best.

We get a second piece of positive news out of the housing industry in as many days today as the Commerce Department announced this morning that new home construction jumped 3.6% in June.

No one is going to put forth the argument that the housing market is all of a sudden in good shape again, but we are starting to see signs that things could be at least leveling off, which is the first step that needs to be made.

We have all been waiting to hear news that the housing market has rebounded, and we got a little indication that things were improving today as homebuilder sentiment rose this month to its highest level since September.

According to the National Association of Home Builders its index of builder confidence jumped two points in July to 17. This is the first time the index has hit 17 since last September.

This is good news! The Commerce Department reported that housing starts soared 17% in May. Housing starts increased to 532,000 from 454,000 the prior month. Projections were for an increase to only 485,000.

Here are the supporting numbers:

• Permits rose to 518,000, up from 498,000. Forecasts were for 508,000.
• Single family homes rose 7.5% to 401,000, the third straight monthly gain.

As the housing market continues to find its footing, one welcome trend for potential home buyers has been falling home prices. The main consequence of the troubled housing market has been a sharp increase in home inventories, and this has led to a massive drop in home prices, and we see news today that home prices are the most affordable that they have been in the past 18 years.

The Housing Opportunity Index tracks home prices, and it reported that during the first three months of this year, 72.5% of homes for sale fell within the affordability range, up from 60% during the last quarter of 2008. This sharp jump is another testament to just how quickly home prices have eroded over the past few months.

One of the programs which may come with the new economic stimulus package is a big tax credit for people who buy new homes. It would help potential buyers across almost every income class, which is not what was being contemplated a few days ago. According to Bloomberg, "By replacing a $7,500 tax credit for first-time homebuyers earning less than $150,000 with a $15,000 break for all income groups as part of the economic stimulus package, senators effectively are encouraging purchases by higher-income households with a reduced risk of default."

Last week, Moody's said it was reviewing debt ratings on four home builders, including Beazer (NYSE: BZH) and Hovnanian (NYSE: HOV), for downgrades. That did not do the shareholder in the companies any favors.

People buying a home for the first time are usually young. They are probably at the beginning of their careers, which means that they do not have much money. In a recession, they would seem to be poor credit risks. For these people, getting a home mortgage should be nearly impossible.

But, a recession does strange things and turns some assumptions on their heads. It turns out the the lower end of the real estate market is getting so cheap that buyers can pick and choose an incredibly large inventory which, in many cases, sellers have to dump at any price.

According to the AP, "First-time buyers are much more flexible in entering the market because they aren't concerned about selling an existing home," National Association of Realtors Chief Economist Lawrence Yun said in a statement. Good point. Most people can't sell their current homes. They won't be in the market for a new one at all. Because of that, dynamic first-time buyers represented 41% of all real estate transactions in 2007.

There is a bit of hidden good news in the NAR analysis. First-time home buyers have a "plentiful" supply of unusually inexpensive homes and an unprecedented opportunity to negotiate on price. As the "retail value" mid-priced and higher-priced homes continues to drop, buyers will come back into those markets as well. Some of the opportunities will just be too good to resist.

Douglas A. McIntyre is an editor at 247wallst.com.

It would seem to be stating the obvious, but the habits of home buyers will probably hold the key to whether the economy will go into its deepest recession in decades. That is the prevailing wisdom, but is it right?

According to Reuters, "a sharper housing bust would leave deep scars in consumer sentiment, which would likely lead to a deep recession." Some economists and real estate experts see home prices falling another 15% to 20% from current levels.

Real estate may be a critical part of an economic recovery, but it is not the only one. Oil and commodities recently had their sharpest correction in years. If oil moves below $100 and the price of agricultural products moves down substantially, the implied cost of living for most Americans will get much better. Under those circumstances, homeowners have more money to pay mortgages.

Wages could also rise. Recent pressure on consumer prices makes it more likely that unions and employees will press for higher compensation. In many cases, they will be turned away. But, worker demands for higher pay spread across the entire economy should yield some improvements in how much people take home.

Housing prices are important, but they are not the only game in town.

Douglas A. McIntyre is an editor at 247wallst.com.

MarketWatch has published a story that details the conundrum new first-time home buyers are facing in today's market. In "First-time home buyers struggle to find down-payment money," staff writer Amy Hoak tells about a middle-class family that bought a house a couple of years ago without having to put any money down. This same family, admittedly, would have trouble finding a loan today to finance their purchase.

Typically, when mortgage lending is restricted, it affects first-time owners the most because they frequently lack the funds for a down payment. According to the MarketWatch article, 45% of first-time home buyers opted for 100% financing between July 2006 and June 2007.

Experts are predicting that lenders are going to require more and more down before they're willing to lend to home buyers. To counteract stricter lending practices, check out loans backed by the Federal Housing Administration (FHA). According to MarketWatch, statistics confirm the recent popularity of these loans: The FHA backed 17,773 purchase loans in December 2006; that increased to 24,817 purchase loans in December 2007.

Down payments for these types of loans are around 3% and there are even down-payment-assistance programs to help to this end.

With market prices catering, buying a home in certain localities may prove a good move.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

Sales contracts of previously-owned homes plunged -2.6% in November 2007, a stat that suggests the contraction in the housing sector will persist in the immediate months ahead.

The National Association of Realtors announced that the pending home index, which tabulates contracts signed for homes but not closed, fell 2.6% in November 2007. Economists had expected a 0.7% decline in November 2007. The index rose in September 2007 and October 2007.

Further, the index declined 19.2% during the previous 12 months. The index declined in 3 regions: -13% in the Northeast, -4.1% in the Midwest, -2.1% in the West, but increased +2.3% in the South.