Maybe we are at the bottom and it is time to buy again in San  Diego and Southern California.

La Jolla, CA—Southern California home sales rose for the 11th consecutive month in May as sales of $500,000-plus homes started to come back. The median price paid increased slightly from the prior month for the first time since July 2007, the result of a shift in market activity where sales of deeply discounted foreclosures waned and mid- to high-end purchases rose, a real estate information service reported.

A total of 20,775 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 1.3 percent from 20,514 in April and up 22.8 percent from 16,917 a year ago, according to San Diego-based MDA DataQuick.

Sales have increased year-over-year for 11 consecutive months.

May’s sales were the highest for that month since May 2006, when 30,303 homes sold, but were 21.2 percent below the average May sales total since 1988, when DataQuick’s statistics begin.

Foreclosure resales – homes sold in May that had been foreclosed on in the prior 12 months – accounted for 50.2 percent of all Southland resales. That was down from 53.5 percent in April and from a peak of 56.7 percent in February. May’s figure was the lowest since foreclosure resales were 50.9 percent of all resales last October.

The remarkably sharp declines in the Southland’s median sale price over the past year have been exacerbated by a shift toward an above-average number of sales occurring in lower-cost inland markets rife with discounted foreclosures. However, the number of homes lost to foreclosure declined over the winter, leaving fewer for bargain hunters to scoop up this spring. Meantime, sales have begun to rise a bit in many mid- to high-end markets, which could be due at least in part to sellers dropping their asking prices.

Last month 83 percent of the existing Southland houses sold were purchased for less than $500,000, compared with 84.8 percent in April. Conversely, sales $500,000 and above rose from 15.2 percent of sales in April to 17 percent in May. The last time the $500,000-plus market made up more than 17 percent of all sales was last October, when they were 19.9 percent of sales.

The median price paid for all new and resale houses and condos sold in the six-county Southland last month was $249,000, up 0.8 percent from $247,000 in April but down 32.7 percent from $370,000 a year ago.

The median price hadn’t risen from one month to the next since July 2007, when it increased 0.6 percent from $502,000 to $505,000.

Last month’s median was the second-lowest for any month since it was $242,000 in February 2002, and it stood 50.7 percent below the peak $505,000 median reached in spring and summer of 2007.

“We appear to be in the early stages of the market gradually tilting back toward a more normal balance of sales across the home price spectrum. As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we’ll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose,” said John Walsh, MDA DataQuick president.

“Let’s not forget we’re into the traditional home buying season right now,” he continued, “meaning more people are purchasing for all of the normal reasons, such as a new job or to get settled before school starts. Many are concerned with finding the right home in the right area, not just the most deeply discounted home.”

Among the reasons high-end sales have been nearly frozen the past year: The “jumbo” mortgages needed to buy such homes have been more expensive and much harder to obtain since August 2007, when the credit crunch hit. Before then, nearly 40 percent of Southland sales were financed with jumbo loans, then defined as over $417,000. Last month it was only 12.0 percent, though that was up from 10.6 in April and the highest since last November, when $417,000-plus loans were used for 12.2 percent of home purchases.

At the lower end of the price spectrum, first-time buyers continue to rely heavily on government-insured FHA financing. Such loans were used to finance 38.4 percent of all Southland home purchases last month, down slightly from 38.9 percent in April but up from 19.7 percent a year ago. In the Inland Empire, more than half of all May home purchases were financed with FHA loans.

Absentee buyers, including investors who will have their property tax bills sent to a different address, bought 19.4 percent of the Southland homes sold last month. That’s up from 16.9 percent a year ago and 18.6 percent in April. The monthly average since 2000: 15 percent.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,052 last month, up from $1,038 the previous month, and down from $1,782 a year ago. Adjusted for inflation, current payments are 52.1 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 60.7 percent below the current cycle’s peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains near record levels, while financing with adjustable-rate mortgages is near the all-time low, as is financing with multiple mortgages. Down payment sizes and flipping rates are stable. Non-owner occupied buying has risen and is above-average in some markets, MDA DataQuick reported.

Home resales rose by 2.4% to a 4.77 million annual rate from 4.66 million in April, the National Association of Realtors said Tuesday.

It was the second straight increase and the fourth in six months. The increase would have been bigger if not for poor appraisals, the realtors indicated.

About a third of May resales involved distressed property. Foreclosures have pushed prices lower. The median price for an existing home last month was $173,000, down 16.8% from $207,900 in May 2008.

"We need to have increased sales to stabilize prices," NAR economist Lawrence Yun said.

While lower prices make houses cheaper, the drop also lowers household net worth and can discourage a purchase as a would-be buyer awaits a better deal. Prices are falling because of excess supply.

"We just experienced the longest, largest housing bubble in U.S. history," said Mike Larson of Weiss Research. "As a result, the recovery process will be a long, drawn-out affair."

The data Tuesday showed inventories of previously owned homes fell last month, down 3.5% to 3.8 million available for sale. That represented a lower – yet still-elevated – 9.6-month supply at the current sales pace, compared to 10.1 in April.

"There is still a considerable distance to travel before prices sink to levels necessary to balance supply and demand in the housing market," MFR Inc. analyst Joshua Shapiro said.

The problem with appraisals could delay recovery, too, according to Yun. He says reports of problems have been "snowballing from across the country, with many contracts falling through at the last moment."

"There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected," he added.

Tighter credit has hurt home sales – as has a quarter-century-high unemployment rate of 9.4%. A Labor Department report Tuesday showed the number of U.S. workers involved in mass layoffs rose in May, climbing to 312,880 from 271,226 during April; these people are identified as initial filers for unemployment insurance.

Realtors hope the $8,000 tax credit for first-time home buyers, inserted in the Obama administration’s economic stimulus package, keeps prodding demand. Previously owned home sales, year over year, were down 3.6% from the pace in May 2008, Tuesday’s report said.

Low mortgage rates have encouraged buying amid the recession. But rates have climbed. The average 30-year mortgage rate was 4.86% in May, up from 4.81% in April, Freddie Mac (FRE) data show. Rates have gone up in June and analysts fear rising borrowing costs might restrain demand.

"There is a danger that the recent surge in mortgage rates will snuff out a recovery before it even begins, said Paul Dales, an analyst for Capital Economics.

Here’s an overview of the major changes the law will enact.

1. Retroactive rate increases
Issuers can’t raise rates on an existing balance unless you’re late by 60 days or more. No longer will they be able to punish borrowers for late payments on unrelated accounts under the practice of universal default or due to "anytime, any reason" clauses.

If the cardholder does trigger the default rate because of a 60-day delinquency, the bank must restore the lower rate once the cardholder demonstrates six consecutive on-time payments. This provision takes effect in August 2010.

Rates can’t be raised in the first year after issuance, and promotional rates must last at least six months.

New credit card rules

1. Retroactive rate increases
2. More advance notice of rate hikes
3. Fee restrictions
4. Restricts marketing and issuance to students
5. Ends double-cycle billing
6. Fairer payment allocation
7. More time to pay
8. Gift card protections

Caveat: Issuers can raise rates at any time for any reason on new balances with 45 days’ advance notice. Cardholders will still need to read correspondence from their creditors.

2. More advance notice of rate hikes
Consumers get 45 days’ notice before key contract changes take effect, including rate increases. Under the current Truth in Lending Act, cardholders only receive a 15-day heads up. This change takes effect Aug. 20, 2009.

Caveat: This provision doesn’t apply to credit limit changes. If your issuer slashes your limit, notification isn’t necessary unless the reduction would trigger a penalty, such as an overlimit fee.

The new rules also don’t cap interest rates. The increased rate can still be triple your existing APR.

3. Fee restrictions
Cardholders will not face overlimit fees unless they elect to allow the creditor to approve overlimit transactions. Issuers can’t charge more than one overlimit fee per billing cycle.

In general, banks can’t charge consumers a fee to pay their credit card debt, a cost some cardholders encounter for payments made by telephone or Internet. They can impose a fee to expedite a payment.

Payments received by the due date — or the next business day, if the bank doesn’t accept mailed payments on the due date — won’t trigger a late fee. If the cardholder pays at a local branch, the payment must be credited the same day.

The new law limits fees on "fee-harvester" subprime cards as well. In the first year after issuance, nonpenalty fees cannot take up more than 25 percent of the initial credit limit.

4. Restricts card issuance to students
Consumers ages 18 to 21 who don’t have adequate income or a co-signer, or who don’t complete a certified financial literacy course, won’t get approved for credit cards. The provision protects young people who lack the means or the knowledge to handle credit cards from miring themselves into debt, but could backfire by pushing students to payday lenders and pawnshops, says Greg McBride, senior financial analyst at Bankrate.com.

According to a recent Sallie Mae study, college students carried an average balance of $3,173 on their credit cards last year, a record high since the first analysis in 1998. A whopping 82 percent revolved a balance each month.

5. Ends double-cycle billing
The new law bans double-cycle billing, the practice of basing finance charges on the current and previous balance. Under this method, the issuer could charge interest on debt already paid off the previous month.

6. Fairer payment allocation
A close look at your card agreement will likely reveal a clause that explains that payments will be applied to lower-rate balances first. Not so anymore. The Credit CARD Act requires above-the-minimum payments to be applied first to the credit card balance with the highest interest rate.

7. More time to pay
Card companies must send statements 21 days before a payment is due. Current law requires a mere 14 days’ notice. This provision goes into effect Aug. 20, 2009.

8. Gift card protections
The legislation includes protections for gift cardholders. The new law prohibits gift cards from expiring for at least five years. Issuer cannot assess inactivity fees unless the card has gone unused for 12 months. The gift card rules go into effect August 2010.