ROBERT SIEGEL, Host:
The latest real estate data leave no room for doubt. The housing market is in the midst of a substantial correction. The Commerce Department reported today 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. Prices of existing homes fell 2.5 percent. In some places, those falling prices are starting to tempt some bargain hunters.
NPR's Chris Arnold reports from Boston.
CHRIS ARNOLD: Whether or not it's a good time to buy a house depends a lot on where you live. Economists say many cities haven't seen a big downturn yet and 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 quite a bit.
ALAN SUTHERLAND: It seems like anywhere from $50,000 to $100,000 less.
ARNOLD: Alan Sutherland is a 38-year-old art teacher. He and his wife, Lorraine, are looking for a house to buy here in Arlington, Massachusetts. It's a suburb just outside Boston. Home prices in the town have fallen 18 percent from their peak in the summer of last year. Back then, Sutherland was visiting open houses, but thought everything was unaffordable.
SUTHERLAND: We actually looked at a condo in Arlington, mid-400s, 425, and as they were selling, they were going up. So we gave up and just put it off.
ARNOLD: 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-300s range. He says he never saw that last year, though when we tagged along house hunting with Sutherland and his broker, Anita Shishmanian, he was finding those cheaper houses had some problems.
Now the floor looks like it's slanting kind of dramatically.
SUTHERLAND: Yeah, there's several. But Anita actually said that she didn't estimate that it would move any more.
ARNOLD: While sales are down from last year, Sutherland's broker says just in recent weeks, her phone has been ringing more with buyers getting interested in looking for deals.
ANITA SHISHMANIAN: Buyers are suddenly just deciding oh, maybe it's time to buy, you know. Because they're always hearing now that it's a buyers' market, it's a buyers' market.
ARNOLD: And it's not just brokers saying that. Mark Zandi is chief economist at Moody's Economy.com.
MARK ZANDI: Well, you know, I'm not saying jump in right away. There's no need to. I think, though, it's a good time to start looking around because there's a lot of inventory out there, there are a lot of options. Moreover, fixed mortgage rates are down a little bit and sellers are willing to deal.
ARNOLD: Zandi recently came out with a report called Housing at the Tipping Point that projects the severity and length of the housing correction in nearly 400 cities and towns across the country, and there is pretty dramatic variation. He says some markets will see modest price declines and may be at the bottom of their trough already - Boston, Napa, California, Salt Lake City, Boulder. He says you might find a good deal on a house there right now.
But in other areas, he says prices will keep going down - Reno, Washington, D.C., Vallejo, California, Naples, Florida, and many others. And some economists still see a strong case for renting. Gleb Nechayev is with Torto Wheaton Research in Boston.
GLEB NECHAYEV: Economic fundamentals favor renting at the moment, there's no question about it. In most major cities today, renting looks like a better deal simply because of how much home prices have gone up.
ARNOLD: Nechayev says even with prices are down some lately, the monthly cost of owning is still historically very high compared to renting. And he says almost nobody expects home prices to go up for a few years. So Nechayev argues it doesn't make to buy a pricey two bedroom condo if you can rent something similar for a lot less. That said, if you find a house that 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.
Chris Arnold, NPR News, Boston.
SIEGEL: And there are projections for housing markets around the U.S. at our Web site, npr.org
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