This post first appeared on Minyanville and our sister site, Dawn Patrol.

Every once in a while, the most important news story of the day is the one the Wall Street Journal allots a mere 200 words.

In a move that will soon be greeted with quiet mutterings of “I should have seen this coming,” British Prime Minister Gordon Blair announced today a shift in the focus of initiatives aimed at reviving the ailing housing industry, and by extension the rest of the economy.

Until this point, much of the government-directed efforts to fix broken housing markets — both here and abroad — have focused on the mortgage side of housing transactions.

This should come as no surprise, as Wall Street banks like Goldman Sachs (GS), Merrill Lynch (MER), Lehman Brothers (LEH) and Bear Stearns — er, JPMorgan (JPM) — had staked their reputations — and balance sheets — on those mortgages.

Foreclosure prevention has attempted to preserve the integrity of the loan by extending its ability to keep generating cash for the lender. If a family or 2 were helped in the process, all the better. But with trillions of dollars in securities propping up the world’s financial system based on unreliable monthly payments from struggling American consumers, the mortgage was saved in favor of the property itself or its inhabitants.

HOPE NOW and Project Lifeline have been our bureaucrats’ best effort at leeping people from being kicked out of their homes. Anecdotally and by the numbers, the results have been less than awe-inspiring.

As part of a larger economic reform package, Brown is taking a decidedly different approach. Any homeowner behind on his mortgage and facing the risk of repossession will have his situation evaluated by a “money advisor,” who, according to the Guardian, will determine whether nor not the loan is worth salvaging.

If this guru of the economically unfeasible gives the thumbs-down, the borrower gets a rescue package; the government gets the house. A housing association or other publicly funded group can then lease the property back to for the former homeowner or otherwise rehab the property for new tenants.

The lender can either be made whole or can retain some of the risk (and therefore potential return) in the property, staying in the game a bit longer.

This focus on the raw asset — the house — rather than on a flimsy deed of trust represents a step in the right direction in the “war on foreclosures.” The mere fact that Washington (and London) are dipping their tentacles this deep into housing markets should rightly disturb anyone with even half-hearted capitalistic ideals – but some government plans are better than others.

The problem with mortgage-focused foreclosure prevention is that it prolongs a borrower’s agony by keeping him in a loan he or she should never have taken out in the first place. The house itself bears the brunt of this strategy’s shortcomings, since homeowners forgo maintenance, landscaping, trash removal and other value-preserving services to survive another month.

By stepping in and taking control of the property before the copper pipes can be ripped out and the repossession process can further erode the home’s resale value, the plan could slow some of the economic hardship and community decay caused by abandoned, vandalized homes.

Although the business of buying and selling distressed mortgage assets — including bank-owned homes — is hacking its way through the world of troubled properties, the scale of the problem and the challenging nature of the transaction itself mean that the crisis will take years to work through.

If the government is going to use taxpayer dollars to try to get us out of this mess, land banks and direct funds for rebuilding communities isn’t a terrible place to start.

It sure beats bailing out Wall Street.

This post first appeared on Minyanville, and our sister site, Dawn Patrol.

Another month, another attempt to use a single data point to foretell the bottom in the housing market.

On the same day the Case Shiller Home Price Index reported the fastest drop in home prices on record (again), the Wall Street Journal released analysis indicating beaten down markets are beginning to work through inventory overhangs.

Shrinking supply in the most troubled markets is likely a blip, however, as volatile trading in distressed assets is driving the real estate market in these areas.

According to the Journal, metro areas like Sacramento, California, Denver, San Diego and Las Vegas actually reported a decline in housing inventory from a year earlier. Supply is still well above historical averages but, the report argues, if this trend continues it could usher in the end to the real estate slump.

But in cities like Portland, Oregon, Seattle, Charlotte, North Carolina and New York, where home price declines are just beginning, the backlog of unsold homes is piling up. Supply in New York and Portland is up 31% and 28% respectively. Stagnant prices and swelling inventory are signs of a market that’s about to crack.

Even in markets poised for a correction, real estate brokers desperate for sales commissions are frantically pounding the table, calling this the buying opportunity of a lifetime.

Meanwhile, back in a world still loosely based on reality, easing inventory is a result of changing market dynamics, not an imminent bottom.

First, in troubled areas like California’s Central Valley and Inland Empire, (east of Los Angeles) Phoenix and Las Vegas, foreclosure and other distressed sales account for almost half the total transactions. As vulture funds and other investors swoop in to purchase delinquent mortgages and abandoned houses, such opportunistic buying has reduced inventory.

Small boutique investment firms, big hedge funds and Investment banks like Lehman Brothers (LEH), Goldman Sachs (GS) and Merrill Lynch (MER) are driving these markets. Some are buying foreclosed homes en masse, while others are snapping up delinquent mortgage at a deep discount. As the new owner of the loan tries to sort things out with the borrower, homes previously for sale come off the market.

The majority of these properties, however, will just end up for sale again: Almost half the delinquent mortgages traded in this market ultimately end up in foreclosure. Investment banks and hedge funds aren’t in the business of owning portfolios of residential real estate, so in a few months they’ll start punting homes at further discounted prices.

Second, year-over-year comparisons for real estate and mortgage data are about to get a lot easier. Think back to the beginning of the credit crunch last summer – the mortgage market all but shut down. Real estate transactions ground to a halt, inventory spiked and price declines began to accelerate.

For as bad as the real estate market is today — and while prices have certainly come down — activity last year around this time was even worse.

In the next few months, new calls for a bottom will ring out. But given that so-called experts have been calling for a bottom since, well, the top, Minyans would be wise to continue to wait patiently for real signs this has occurred.