Dropping US home prices lure bargain-hunters into market

Paradise Valley, Arizona: If you believe the media hype, there are millions of homes for sale in America and not a buyer in sight. But one person's dead market is another's buying opportunity.

In the Phoenix suburbs, a five-bedroom home with a large yard and swimming pool attracted a handful of prospective buyers on a recent weekend afternoon, lured by a reduced price tag and desert mountain views.

As he wandered out to the pool with his wife, Elliott Farber voiced the cautious optimism of someone who has watched the market fall and thinks it just might be time to jump in.

"I hope. Maybe. Fingers crossed. Who knows? It seems to be a decent time to buy, at least from what we can gather, in terms of home prices dropping," said Farber, who just relocated to Arizona from Boston.

Training consultant Mike Forrester and his wife also toured the spacious home, admiring the hardwood floors, fireplace and vaulted ceilings. The asking price has been reduced to $998,000 from $1,095,000.

Forrester isn't sure prices have hit bottom yet and said a decision to buy isn't just about money. "You have to be a savvy shopper. I think the market hasn't bottomed out yet," he said. "At the same time, there's some [price] threshold ... where you have people who just want what they want."

While sales of existing and new homes continue to fall across the US and the credit crisis makes mortgages harder to get, tumbling prices have begun to lure a few credit-worthy bargain-hunters.

Southern California sales soared nearly 65 per cent in September from a year earlier as buyers seized on the region's glut of foreclosures and depressed real estate prices, according to MDA DataQuick.

Mithun Vora, 28, and his wife are among those who took the leap in September, buying a seven-year-old home in northern California for $630,000. Tired of renting, they felt it was folly to risk missing a house just because they were trying to time the bottom of the market perfectly.

Vora said it was like "trying to catch the last compartment of the last train - you can never get the timing right.

"Prices are lower than they were two or three years ago. So it was a good price for a good house."

Prices of existing homes fell by a record 9.5 per cent in August as sales slowed, according to the National Association of Realtors.

And while millions of homes still sit unwanted on the market, inventories of unsold homes shrank - a development that will help the market as long as the credit crisis does not cause mortgage lending to dry up.

Vora said he and his wife looked at about 100 houses before buying and considered foreclosures and short sales to get the best possible bargain. And while they got the house for $15,000 below what the seller was asking, Vora said there was plenty of competition.

The Indian-born engineer did get a close-up view of the credit crisis. Despite having a solid job, perfect credit scores and no debt, Vora struggled to get a mortgage and ended up with a higher interest rate than they would have liked.