headlines Fishing for Housing Bargains

Fishing for Housing Bargains : When Jana Sestili and her husband decided to move with their two children to a larger house in the Pittsburgh suburbs, some people thought they were taking a foolish risk. The refrain, says Sestili, was simple: “I don’t know how you’ll do this in this market.” But the couple ignored the doubters and forged ahead anyway. They sold their house for their asking price of $329,000, well above the $213,000 they’d spent to build it nine years ago. And they plowed the proceeds—and then some—into a four-bedroom, $400,000 dream house, complete with an in-ground pool, a brand-new kitchen and 4,500 square feet of living space. “For what’s in the house, we got a great price,” says Sestili, an official with the University of Pittsburgh’s alumni association.

It’s tempting to listen to the neighbors or glance at the latest headlines (foreclosures! falling home sales!) and cower on the sidelines of the real estate bust. But some folks are looking past today’s uncertain economy and concluding that in a number of markets real estate deals are just too good to pass up. Indeed, some housing experts have been arguing for two years now that with the combination of lower home prices and rock-bottom mortgage rates, the cost of buying a home is lower than it has been in years. David Berson, chief economist at the PMI Group, says that during the boom, the median sales price for a U.S. home reached 7.3 times disposable per capita income; today that ratio is five times. “Things are amazingly affordable,” he says.

Of course, just because homes prices have declined doesn’t mean they can’t go any lower. While careful buyers can find bargains in almost any market, experts say some cities look a lot better than others. According to PMI’s risk index, which uses measures like economic conditions and family income to predict the direction of home prices, more than a quarter of the country's 381 metro areas have less than a 30 percent chance of seeing lower prices two years from now. (Pittsburgh’s risk: a modest 12 percent.) And many of them happen to be in the Heartland. That’s partly because while the coasts were booming, housing prices in much of the Midwest and South advanced at a slower pace, so they didn’t have as far to fall. Some of these places are also benefiting from a welcome dose of good news about the local economy, whether it’s a new ballpark in Omaha or a growing regional shale-gas industry bringing jobs to Pittsburgh.

Nationwide, the picture is fuzzier, with every shred of good news seemingly countered by bad news. Inventories of unsold homes are down 13 percent from their peak, but there’s still a 12-month supply at the current sales pace (in a healthy market, it’s more like a six-month supply). The government’s tax credit for home buyers helped for a while, but sales fell when the credit expired. Default notices have declined from their April 2009 peak, but they still approach 100,000 a month. Amid the crosscurrents, even real estate experts are stumped. “I don’t think anybody knows where the market’s going in the near future,” says Yale economist and housing guru Robert Shiller.

Years from now, of course, we’ll know the exact bottom of the housing market. In the meantime, experts say buyers can mitigate their risk by looking at markets with steady economies and low odds of falling prices. We scoured the numbers to find metro areas that appear to be past their bottom and where unemployment—a key measure of real estate health—is below the national average of 9.6 percent. The result: 20 metro areas where things may finally be looking up. For the latest updates PRESS CTR + D or visit Stock Market news Today

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