Inventories of unsold homes have dwindled, buyers are prowling for deals, and the credit crunch appears to be improving. Some experts see the rash of foreclosures easing off.

And, for good measure, the Federal Reserve on Wednesday slashed interest rates a half-point, a move that could help homebuyers and existing homeowners.

Is Sacramento's woeful housing market bottoming out?

The answer isn't immediately clear. The flood of relatively inexpensive, bank-owned properties has clearly breathed new life into the market, and easier credit would help improve the situation. But a month's worth of downright scary news about the financial markets and the economy has some analysts convinced that home values will continue to fall.

Even if prices are close to a bottom, the recovery is going to take a while.

"We might be hitting that bottom … but we might be at that bottom for a while," said Dean Werhli, a vice president in the Elk Grove office of market researcher Sullivan Group Real Estate Advisors. "We could be skidding along this bottom for quite some time."

Consumer advocate Paul Leonard offered a bleaker prognosis: The foreclosure crisis could worsen over the next year, and the state's faltering economy won't help.

"It's certainly good to see that there is new (sales) activity, but there are still a number of factors out there that suggest that this problem is going to be with us for a while statewide, particularly if you look at the Central Valley," said Leonard, director of the California office of the Center for Responsible Lending.

But Warren Adams of Security Pacific Real Estate in Sacramento said he's seen no slowdown in sales activity the past few weeks, despite historic turmoil in the stock market and predictions of a global economic meltdown.

He said the boomlet has even survived the demise of downpayment-assistance programs such as the one pioneered by Sacramento's Nehemiah Corp. of America. The program was phased out by Congress as of Oct. 1.

"Even with what we've been through, people are still buying these houses," said Adams, who deals a lot in bank-owned properties. "I'm still getting multiple calls on these properties. … You have investors buying properties who a year and a half ago weren't looking at anything."

The region's economy has a lot riding on this. The bursting of the housing bubble caused considerable harm to the economy in Sacramento and across the state. As home values plunged, equity "extractions" – cash generated by refinancing, home equity loans or outright sales – fell by 34 percent last year in Sacramento, according to MDA DataQuick. That took $2.1 billion out of the region's economy.

Unemployment rates – 7.4 percent in Sacramento, 7.7 percent for the state – are at their highest in 12 years.

Signs of life have emerged, though. September marked the sixth straight month of higher sales volumes in the eight-county area tracked by DataQuick. In Sacramento County, sales in September nearly tripled compared with a year earlier.

The surge was the result of investors and others fishing for cheap bank-owned houses. Nearly two-thirds of all September sales in Sacramento County were foreclosed properties, DataQuick said.

That brought down the price. Sacramento's median sales price fell to $201,000, a 48 percent drop from the 2005 peak, DataQuick said.

But the boom in sales had another consequence: It cleared a ton of inventory off the books. The supply of unsold homes fell to 11,022 in September in Sacramento, Placer, Yolo and El Dorado counties, according to market researcher TrendGraphix. That was the lowest it's been in 19 months.

That's a key sign that the market is stabilizing, Wehrli said. Even if the economy worsens, "it's going to be difficult for prices to go much lower," he said.

Kathryn Boyce, who follows the Sacramento region for consultant Hanley Wood Market Intelligence, offered additional evidence of a market beginning to turn: Builders are quietly looking for land again.

Call The Bee's Dale Kasler, (916) 321-1066.