Falling Home Prices Tempt Bargain Hunters

A real-estate sign announces "New Price"

hide captionSellers looking to lure reluctant buyers back to the housing market are increasingly willing to reconsider their asking prices.

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Median Home sales i i

hide captionThe latest figures from the National Association of Realtors show that nationwide, the median sale price — half of all homes sold for more, half for less — of an existing single-family home fell 2.5 percent in September from the same time last year. The drop was more pronounced in the Northeast, where prices were down 5.1 percent, and the West, where they fell 4.3 percent.

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Median Home sales

The latest figures from the National Association of Realtors show that nationwide, the median sale price — half of all homes sold for more, half for less — of an existing single-family home fell 2.5 percent in September from the same time last year. The drop was more pronounced in the Northeast, where prices were down 5.1 percent, and the West, where they fell 4.3 percent.

NPR

WHERE WILL PRICES FALL?

In a recent report, Moody's Economy.com forecast price declines for dozens of metropolitan areas across the United States. Here's a look at several cities with falling prices ahead, along with when they can expect the housing market to bottom out, according to the report:

ARIZONA

 

TUCSON

Peak Price: 1st Quarter 2006

Trough Price: 2nd Quarter 2008

Projected Decline: - 13.4 percent

 

__________________________

CALIFORNIA

MERCED

Peak Price: 4th Quarter 2005

Trough Price 2nd Quarter 2009

Projected Decline: - 16.1 percent

 

SAN DIEGO

Peak Price: 4th Quarter 2005

Trough Price: 2nd Quarter 2008

Projected Decline: - 8.5 percent

 

LOS ANGELES

Peak Price: 2nd Quarter 2006

Trough Price: 4th Quarter 2008

Projected Decline: - 4.8 percent

 

__________________________

FLORIDA

 

CAPE CORAL

Peak Price: 4th Quarter 2005

Trough Price: 2nd Quarter 2005

Projected Decline: - 18.6 percent

 

MIAMI

Peak Price: 1st Quarter 2006

Trough Price: 2nd Quarter 2008

Projected Decline: - 5.5 percent

 

__________________________

NEVADA

 

LAS VEGAS

Peak Price: 4th Quarter 2005

Trough Price: 2nd Quarter 2008

Projected Decline: - 12 percent

 

RENO

Peak Price: 4th Quarter 2005

Trough Price: 4th Quarter 2008

Projected Decline: - 17.2 percent

 

__________________________

NEW YORK

NASSAU

Peak Price: 1st Quarter 2006

Trough Price: 2nd Quarter 2008

Projected Decline: - 8.1 percent

 

__________________________

WASHINGTON, D.C./VIRGINIA

Peak Price: 4th Quarter 2005

Trough Price: 2nd Quarter 2008

Projected Decline: - 12 percent

 

Source: Moody's Economy.com

Get the Full Forecast: More predictions for price declines in U.S. metropolitan areas

The latest real-estate data leaves no room for doubt: The housing market is in the midst of a substantial correction.

The Commerce Department reported Thursday that the median price for a new home fell 9.7 percent from the same time last year. That’s the biggest drop since 1970. Existing home sales fell 2.5 percent.

Of course, prices and sales have been falling for some time now. And that's starting to tempt some bargain hunters.

Whether it's a good time to buy a house depends a lot on where you live. Economists say many cities haven't seen much of a correction yet; they predict that prices will keep sliding in some of them for years.

But other areas could level off much sooner, in part because prices are already down. In Arlington, Mass., a suburb just outside Boston, home prices have fallen 18 percent from their peak in the summer of 2005. Back then, 38-year-old art teacher Alan Sutherland was visiting open houses, but found everything to be unaffordable.

"We actually looked at a condo in Arlington in the mid-400s … and as they were selling, they were going up. So we gave up and just put it off," Sutherland recalls.

But in the past couple of months, Sutherland says friends have been calling to tell him about not just condos, but single-family homes they've seen in the area for sale in the mid-$300,000 range. He says he never saw that last year.

Don't Jump In. But Do Look.

Broker Anita Shishmanian is working with Sutherland on his house hunt. She says that in recent weeks, her phone has been ringing more, as buyers get interested in looking for deals.

"Buyers are suddenly just deciding, 'Oh, maybe it's time to buy,'" Shishmanian says. "They're always hearing now that it's a buyers market."

And it's not just brokers saying that. So is Mark Zandi, chief economist at Moody's Economy.com.

"I'm not saying jump in right away," Zandi says. "There's no need to. I think, though, it's a good time to start looking around. There's a lot of inventory, a lot of options. Inventories have never been as high as they are today. Moreover, fixed-mortgage rates are down a little bit, and sellers are willing to deal."

Zandi recently came out with a report, "Housing at the Tipping Point," that projects the severity and length of the housing correction in nearly 400 cities and towns across the country. The variation is dramatic. He says some markets will see modest price declines and may be at the bottom of their trough already: Boston, Napa, Calif., Salt Lake City, Boulder, Colo. He says you might find a good deal on a house there right now.

But in other areas, Zandi says prices will keep going down: Reno, Washington, D.C., Vallejo Calif., and Naples, Fla., among them.

Rent or Buy?

And some economists still see a strong case for renting.

"Economic fundamentals favor renting at the moment," says Gleb Nechayev, with Torto Wheaton Research in Boston. "No question about it. In most major cities, renting seems like a better deal because of how much house prices have gone up."

Nechayev says that even with housing prices starting to come down, the monthly cost of owning is still historically very high compared with renting. And he says almost nobody expects home prices to rise for a few years.

So he argues it doesn't make sense if you're spending, say, $1,400 a month to rent a two-bedroom apartment to pay a $2,200 mortgage on a similar two-bedroom condo. True, there can be tax savings when you own. But there are also added costs: insurance, condo fees, maintenance and repairs and property taxes.

That said, if you find a house you just love and want to be in for a long time, many economists say it's not a bad time to buy in some cities — if you do your homework.

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