There are tentative signs that the US housing market is approaching a bottom but it is premature to declare that recovery is under way. Mortgage rates are low and tax credits to first-time buyers and lower prices are raising interest in home buying.

But as long as home prices keep plummeting, many potential buyers will sit on the sidelines. And homeowners who are underwater, with negative equity, might throw in the towel and default, putting more homes on the market – thus pulling down prices even more. Foreclosures and distressed properties already accounted for more than half of existing home sales in March.