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Going on House Calls
Marianela Cordoba and her husband, Abraham Telechanski, a professional couple in their mid-30s, are comfortable in their brand-new rented apartment in New York's Spanish Harlem. They have a concierge dressed in red, a garage, and a shuttle to take them to the train station.
Four months ago, they weren't even thinking of leaving. But now they're looking for a house to buy.
Though some are losing their homes in the U.S. mortgage crisis, for others, crisis is opportunity, as the Chinese proverb would have it. Younger and first-time buyers with solid credit can suddenly afford homes.
"For those who lose, someone else will gain," said Robert Aalberts, professor of real estate law at the University of Nevada, Las Vegas, and editor of the Real Estate Law Journal.
Imagine a person who bought a house in Las Vegas two years ago for $300,000, and later found he could not pay the loan, he suggested. "And another person comes along -- like a former student of mine -- with good credit, a good job, who buys the house for $150,000.
"In two, three or five years, perhaps that house is up to $300,000. And my friend will have pocketed $150,000."
Single-family home purchases rose slightly in January 2008, though overall sales are still dropping, according to the National Association of Realtors.
Indeed, real estate purchases took a hike up in the Philadelphia region this past December, according to the Prudential Fox & Roach, Realtors HomExpert Pending Home Sales Index.
Americans still want their own homes as much as ever, in the opinion of Daniel McGinn, author of House Lust: America's Obsession with Our Homes.
If during the boom many bought or renovated property compulsively, expecting an eventual profit, most people buy houses "because of stuff that's going on in their lives," like a baby on the way or a job offer in another city, he said.
Matt Zahler, a 28-year-old student at Carnegie Mellon University in Pittsburgh, is getting married in May, and he and his wife hope to buy a place in Boston. Zahler thinks the timing is right: "The prices are going down to some degree, and there's room for negotiation," he observed.
After six months of looking around, he concluded that he can buy for $50,000 less than he could in 2007.
The National Association of Realtors, forecasting soft sales in the first half of 2008, is trying to seduce buyers into acting now.
"If you purchase one of the millions of homes that will be sold this year, the National Association of Realtors wants you to know you're making a good move," one of its TV commercials declares. The spot is part of an association ad campaign to convince buyers that the timing is just right.
Cordoba and Telechanski agree. They'd always dreamed of buying a house. "We had the feeling that we were throwing our money away paying a rent in Manhattan," said Cordoba. At the same time, for a long time they'd felt that "it wasn't the right time," she said.
They calculate they'll pay more than their nearly $2,500 rent but believe the difference will be worth it.
In fast-growing areas like California, Nevada and Florida, the subprime mortgage crisis has hit more violently; foreclosure rates in these regions are among the highest, and prices are down dramatically.
Miami prices tumbled the most over the year to January 2008, by 15 percent, according to the Standard & Poor's/Case-Shiller Home Price Index. Next weakest were San Diego, Las Vegas and Detroit.
But Realtors in some of those markets see a silver lining. "Everybody is looking to invest in Miami, because it's a place that meets the need of many people," said Lorena Escobar, a real estate agent at Century 21 United TRG in Miami Beach.
Escobar thinks Miami prices are stabilizing and says buyer interest is picking up. Some of her clients are foreign investors, from Latin America, Canada, Spain, France and Germany.
Cordoba and Telechanski are focusing their search on gated communities in New Jersey, and in New York City suburbs within commuting range to the city. So far, they haven't found what they are looking for -- and prices don't seem as low as everyone is saying.
"We're betting that in six months prices will come down," said Cordoba. "So there's no hurry."
Or is there? Although many people expect prices to fall further, some analysts think waiting could be a mistake. "Nobody knows where the bottom is," warned Aalberts. "But if you wait much longer and prices go up, then the opportunity is lost."