A frequent question voiced in dinner party circles in this neck of the woods (the metropolitan New York City area) is, 'Is now a good time to consider buying or investing in a home?'

Well, the latest S&P Case Shiller home price index suggests that home prices are likely to remaining sluggish -- selected, niche market gains, with flattish prices in most other markets -- through at least mid-2011. Hence, from a home price standpoint, the bias in tipped toward waiting a quarter or two, if you do not have to purchase a home.

Will home prices keep falling? The answer is yes. But why this is happening? The reason lies in high unemployment and the increased number of foreclosures.

Here are some analysts' views on the market, as reported by CNNMoney:

• Fiserv, a market analytics company, had forecast price gains of 4% in February. Their latest prediction is for a 7.1% drop in prices.

The loans that got us into this mess were generally the first to fall. Variable rate mortgages written without documentation for people with sketchy credit histories shocked nobody as their slide became an avalanche. But, the good stuff is starting to follow. An increasing amount of fixed rate mortgages offered to borrowers with solid credit histories are feeling their ways to foreclosure. Blame unemployment for this one. When people can't work, it gets pretty hard to pay the mortgage.

Fixed rate, high quality mortgages had a foreclosure a year ago. Last quarter, it jumped to 33%, according to a Mortgage Bankers Association report. As this happened, the amount of homeowners behind on their payments or in foreclosure just set another record high ... for the ninth month in a row. Subprime mortgages are headed in the other direction. Low quality adjustable rate mortgages are now 16% of new foreclosures -- compared to 35% last year. And, more than 18% of Federal Housing Administration loans are anywhere from one payment behind to in foreclosure, with California, Nevada, Arizona and Florida worst off: together, they accounted for 44% of new foreclosures.

It looks like the housing market is coming back, but there's still reason to be careful. In July, home resales had their highest monthly increase in at least a decade. The rush is driven in part by a tax credit that expires on November 30, 2009. The rate of sale grew 7.2%, ahead of expectations.

Last month, sales hit a seasonally adjusted annual rate of 5.24 million in July -- up from a 4.89 million in June. This is the fourth month in a row in which seasonally adjusted sales increased, and it was the strongest growth rate since August 2007. A Thomson Reuters survey had forecast 5 million, but the reality exceeded that.

There's good news and bad news about the mortgage market. The good news is that you can get your information from a variety of sources. The bad news? You really need to get your news from a variety of sources.

Conflicting reports Wednesday suggest that mortgage applications are up -- and down.

Are mortgage rates affecting U.S. mortgage applications? The short answer most likely is yes. Mortgage applications tumbled to a 7 month low, with refinancing loans down 30%, according to Reuters. This is clearly not a good sign for the housing market.

Kenneth Rosen from the University of California says that mortgage rates are just one factor causing the drop. He adds that high unemployment, concerns for job security, and problems with buyers being unable to sell their existing homes are also affecting the market.

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.

Your mission, should you decide to accept it, Mr. Phelps, is to boost the economy and increase employment but not allow inflation to run rampant. As usual, the secretary will disavow any knowledge of your actions should you fail. This message will self-destruct in five seconds. Good luck, Mr. Phelps. Or should that be Mr. Bernanke?

That, in a nut shell, is the fine line the Fed must walk. It has to get the economy going and more people back to work, mostly by pumping money into the economy. But it can't put too much money into the system or inflation will run rampant. Right now, the presses are running 24/7, and the money is flying out the Treasury's and Fed's windows, seemingly to almost anyone walking underneath them. The stimulus package is in full swing. But what signs are there that it's working?

Did you hear? Mortgage rates are surging. That should be no surprise. All we had to do was look at the sharp sell off in US treasuries and you know that mortgage rates would follow suit. The 30 year fixed rate mortgage rate jumped to 5.29%, up from 4.91% just a week ago. On April 2nd the rate was 4.78%.

Just to give you an example in real dollar terms, let's take a $200,000 30 year fixed mortgage at 5.29%. Your monthly payment would be $1109.37 and your 30 payments would be $399,372.25. At 4.91% your monthly payment would be 1062.67 and your 30 payments would be $382,560. So in real dollar terms your cost has risen $16,812.00. In addition lenders are charging 0.7% in fees and points, unchanged from the previous week.

There is an old saying: "never fight the Fed." If you had been short this bond market, you probably could be wiped out in one afternoon. When the Federal Reserve made its announcement a short time ago that they were buying long term securities the futures on the long bond jumped 4.25 basis points, or more that $4000.00 on just one contract. If you were long say 10 contracts you would be sitting on a $40,000 profit this afternoon.

The Bank of England cut its key rate by half a percentage point to 1%. However, even with the move, the Monetary Policy Committee (MPC) said that there was still disruption in money markets and the rate cuts have not yet had their full impact.

The MPC cited the sharp drop in output in the fourth quarter of last year and a similar drop early this year.

Nationwide, the UK's largest building society announced that it reduced its base mortgage rate to 3% from 3.5%.The MPC pointed to the global nature of the current slowdown and stated that the supply of credit to households and businesses remained constrained.

This post is part of AOL Money & Finance's Best & Worst in Money 2008 feature.

Chicken Little's warning came as good news to astronomers hoping for a better view of the sky. In the same way, not all results of the economic morass of 2008 have been disastrous, at least in the short term. Which of these bits of silver lining do you think shone most brightly this year?

Sales, sales, sales

You've no doubt witnessed the deeper discounts available during the 2008 holiday seasons as retailers, spooked by a drop in consumer spending, are trimming prices to the bone, sometimes beyond, just to keep the cash flowing. The car industry in particular has been caught between the hammer of consumer fear and the anvil of tight credit, so if you're in need of a new car, you'll find dealers, stuck with lots full of new models, ready to cut unheard-of deals.

Cheaper homes

As Lita Epstein reported here recently, houses have declined in value for seven straight quarters, which is bad news, as we've learned, for subprime mortgage holders. For those with good credit, or cash, shopping for a new house the market correction has been a godsend. Since the prices have tumbled furthest in some of the most desirable areas of the country, those retirees who don't need to sell their present home to fund a move to the sunny climes of California, Arizona, or Florida will find some great bargains. In Mountain Home, California, for example, an estimated 90% of all mortgages are upside-down, and upside for buyers shopping in a down market.