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Many American cities transform themselves during the real estate boom. Rundown neighborhoods revive from Washington to Dallas to Los Angeles. And the recovery even reached parts of cities like Newark of Cleveland at once seemed dead. Which raises the question of what happens now is national prices fall.

Nicolas Retsinas will help us answer. He's director of the Joint Center for Housing Studies at Harvard University. Good morning, sir.

Mr. NICOLAS RETSINAS (Director, Joint Center for Housing Studies, Harvard University): Good morning.

INSKEEP: What kind of people had been moving back to cities?

Mr. RETSINAS: Well, different types. Most of them has been prompted by young people. Young people who, perhaps, do not want to live in the suburbs, want the amenities of a downtown, want to be close to work, which is often office work, which is often office work. That's been an important part of the demographic. But the second not insignificant are empty nesters. People who have children left them, now are in a big home in the suburbs and just get tired to mowing a lawn, and say, gee, why not an apartment downtown.

INSKEEP: So are some of those people in trouble now?

Mr. RETSINAS: Well, some of them are depending really on their economics, on their job situation. In terms of the young people, the young people are going to be fine as long as they are still working. I'm afraid, however in terms of the young people tomorrow wanting to buy a home, some of the mortgages that allow them to buy that condominium without a down payment are not going to be around anymore.

INSKEEP: Well, let's talk about that because let's face it some of the prices in downtown areas just seem completely insane, and even if they drop a little bi they seem insane. You're saying people aren't going to be able to reach that price anymore.

Mr. RETSINAS: That's right. A lot of times they did. Again, if you think about a young people, of course, aren't able to accumulate a savings for a down payment and in recent years, down payments didn't matter, you could buy no-down payment mortgages, easy enough to get. But today, we have, I think, reawakened to the importance of a down payment. And it's very difficult to get a mortgage, to get credit without a down payment, which many young people aren't able to accumulate.

INSKEEP: Or is this something you have to worry about if you're the mayor of Chicago or St. Louis, and you want your city to keep coming back?

Mr. RETSINAS: Well, it is. It's certainly going to slow the revitalization. I'm afraid in the worst case you can have unfinished buildings because developers aren't able to get the finance, and in some cases, it's going to take awhile for the buildings to be absorbed into the housing market. Now, I'm afraid that even inner city revitalization in not immune from the collateral damage of the housing market.

INSKEEP: Is there also just a sense that if you're a homebuyer and you're thinking about moving into a downtown neighborhood, an inner city neighborhood or a reviving neighborhood that feels like a risk, and the uncertainty in the real estate market in just going to make it feel like too much of a risk.

Mr. RETSINAS: Well, that's part of it. There's another even more practical problem, which is, you have to sell your house first. And there's not a lot of people buying homes. Home sales have dipped dramatically over 25 to 30 percent. And that's a precondition for most people to think about relocating into an apartment downtown.

INSKEEP: Mm-hmm. And just very briefly though, could there be an upside here if these crazy prices do get a little bit more reasonable?

Mr. RETSINAS: Well, it would. Probably the first thing that's going to happen, though, a lot of the condominiums are probably going to convert into rental units. And with the rental units, of course, you don't need a mortgage, so that will allow some people to continue to opt to live downtown, but again, probably slowing the major redevelopments that have taken place today.

INSKEEP: And you say slowing the major redevelopments. Are developers going to be more reluctant to throw money into condo projects or reviving houses or anything else?

Mr. RETSINAS: Oh, I think they're already doing that. I mean, this is clearly an asset that they'd seen can depreciate, doesn't always appreciate, so they're going to think twice about starting that new project downtown.

INSKEEP: Are you living downtown?

Mr. RETSINAS: I live in Providence, Rhode Island, right on the outskirts of downtown.

INSKEEP: And real estate there?

Mr. RETSINAS: Real estate is softening, to be calm.

INSKEEP: Okay. Well, best wishes to you there. Thanks very much.

Mr. RETSINAS: Thank you. Bye-bye.

INSKEEP: Nicolas Retsinas is director of the Joint Center for Housing Studies at Harvard's Kennedy School of Government.

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