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NEW YORK (AP) – While no one is ready to call the bottom of the worst housing collapse in decades, there were glimmers this week that the severity is waning.

The decline in home prices is starting to ease and in some cities values are starting to rise again. Existing home sales rose slightly from June to July, and the glut of newly built homes on the market fell to a five month low last month.

“The bottom of the housing downturn is coming into view,” said Moody’s Chief Economist Mark Zandi.

But there are still very serious risks to any housing turnaround. Mortgage rates are above 6 percent when they should be below, based on historical trends. Fannie Mae and Freddie Mac, which together hold or guarantee half the U.S. mortgage debt, could need a government bailout. And a slowing economy and rising unemployment could scare off home buyers.

There was also was plenty of bad housing news this week among the slivers of good.

The closely watched Standard & Poor’s/Case-Shiller home price index tumbled a record 15.4 percent during the quarter from the same period a year ago.

Likewise, a government report Tuesday showed second-quarter home prices falling by 4.8 percent, also a record.

And the surprising 2.4 percent increase in new home sales from June to July reported Tuesday was really an accounting bounce because June was worse than first measured.

“We need to see more of the same (kind of reports) over the next few months showing increasing affordability and a reduction in inventory,” before a housing recovery can start, said Nigel Gault, Global Insight Chief Economist.

Nevertheless, home prices in 14 cities in a Case-Shiller index of 20 across the country showed improvement from May to June. Nine even recorded positive returns, including Dallas, Minneapolis, and Cleveland.

And Zandi said the worst may be over for some markets like Boston, Chicago and Denver where prices have come down enough to be more line with local incomes and rents.

While the most overheated markets like Las Vegas, Phoenix and Los Angeles continue to post sharp price declines, sales there have jumped in recent months as buyers snatch up cheap distressed houses.

“It’s therapeutic that these foreclosed properties are being sold off at deep discounts,” Zandi said. “It’s necessary for those markets to work through them.”

Las Vegas led the largest annual declines in the Case-Shiller index, falling almost 29 percent followed by Miami and Phoenix at about 28 percent.

“There’s no question people are getting values today better than they could have dreamed of getting two years ago,” said Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors Inc. in Miami.

He said sellers have finally come to terms with the market and are pricing to attract serious buyers.

Bob Hays, a builder in Miami, sold one of his luxury homes that sat on the market for six months after reducing the listing price by 18 percent to $1.85 million.

“We felt that was the way the market was going,” Hays said. “We had to get real and expect less.”

The Commerce Department said Tuesday that the median price of a new home was $230,700 last month, down 6.3 percent from July last year.

Lower prices, coupled with gas prices that have fallen from record highs, are restoring affordability for some home buyers. And that is partly why Americans are feeling better about the economy.

The Conference Board, a private research group, said Tuesday that its consumer confidence index rose for the second month in a row.

And that’s good news for the real estate market.

“Things are looking promising,” said Gault. “We’re starting to see some of things we need to form a bottom in the next six to 12 months.”

Copyright © 2008 The Associated Press, J.W. Elphinstone (AP Business Writer). All rights reserved