Painful as it is, all this housing distress has one advantage, says Joel Singer, executive vice president of the California Association of Realtors.

It's no longer impossible to buy houses in a state where median prices hit nearly $600,000 in the recent boom.

"In a sense, what has occurred is probably in our best interest," he told hundreds of real estate agents gathered Thursday in Sacramento for a statewide convention. "As brutal as it is if you're a homeowner who is selling, this incredible drop in prices brings California closer in line to the nation as a whole."

Today's statewide median, skewed by high numbers of bank repos and other distressed listings: $256,700.

"That affordability, in itself, will help cure this problem in the future if we can maintain it," said Singer. "It also makes California, in my book, a more competitive place, something we all need in terms of long-term economic growth."

Singer told agents from every corner of the state to expect more distress, even as he sees a "bottom forming" in the low-end market and the higher-end market still declining. California remains "uncharted territory," he said.

Nearly nine in 10 homes sold in Solano County in March were bank repos, short sales or had some history of financial distress. Sacramento County was only somewhat better, with seven in 10 sales being distressed homes.

Distress sales have crushed prices, but have also crushed commissions, even as sales have risen, Singer said.

"If you look at the dollar volume of housing transactions, why does it still feel so bad when sales are twice what they were? It's because the dollar volume of housing contracted by 53 percent. If you're getting half of what you made in the peak year of 2005, you're beating the average, and that's why you feel so bad. That's why I am so impressed that there are so many of you still here. Most industries don't survive a 50 percent downturn."

New ways to use tax credit

By all accounts, first-time homebuyers have been thrilled at getting an $8,000 federal tax credit after closing escrow. Now the deal is being made even sweeter.

Buyers can now convert the credit to a down payment or help pay closing costs with it, the government has announced. That, in turn, can attract a lower interest rate.

The new option applies to first-time-buyer loans insured by the Federal Housing Administration. Approved lenders can "monetize" the tax credit for borrowers, U.S. Housing and Urban Development Secretary Shaun Donovan said.

The aim, of course, is to stimulate still more home sales. The tax credit began in February, part of a $787 billion stimulus plan.

The credit is for new and existing homes purchased between Jan. 1 and Dec. 1, 2009. Married couples jointly earning up to $150,000 a year and singles earning up to $75,000 a year are eligible.

State credit increase stalls

Meanwhile, plans to allocate $200 million more for California's popular $10,000 tax credit for buyers of new, unoccupied homes have fallen off the fast track – for now.

Assembly Bill 765, proposing to triple the current allocation from $100 million to $300 million, was stripped of the new amount before passing the Assembly 71-4 on Monday. It is now set for Senate action.

As passed, the bill allows people to more easily reserve the tax credit and extends the deadline for eligibility from December to March 2010.

A spokeswoman for the bill's sponsor, Assemblywoman Anna Caballero, D-Salinas, said Thursday that the precise amount of a boosted allocation was "taken out to keep the bill moving." The amount will be decided later, she said.

The state's home-building industry is pressing for more funds because of high interest in a credit that started March 1.

As of this week, buyers had already applied for $72.5 million of the $100 million allocated. There are no income limits, and both first-time and repeat buyers are eligible if they move in.

Why the funding snag? Legislative analyses of the bill note beliefs of some economists that a buyer credit does little to stimulate the economy and may cut into sales of existing homes. Lawmakers are also wrestling with a $24.3 billion budget deficit.

Protection for renters

Thousands of Sacramento-area renters can count on new protections when a landlord loses the house to foreclosure.

Gone is the 30-day notice to get out when the bank or a new buyer takes the house. That standard has sent countless capital-area renters packing fast the past two years amid nearly 40,000 foreclosures. A new law signed by President Barack Obama is more generous:

• Renters with leases can stay until their leases expire.

• Renters with month-to-month arrangements get 90 days' notice.

The provisions are in the Helping Families Save Their Homes Act signed May 20.

California is considering legislation to conform state law to the new provisions. AB 603, proposed by Assemblywoman Nancy Skinner, D-Berkeley, is awaiting a vote by the full Assembly.

Call The Bee's Jim Wasserman, (916) 321-1102. Read his blog on real estate, Home Front, at www.sacbee.com/blogs.