Real estate: Is it time to buy?

Buyer’s market. Those suggestive words are increasingly bandied about by brokers—after all, it’s in their interest—but seriously? With pink slips swirling and mortgage lenders in lock-down mode, the idea of homeownership seems a lot scarier than it did during the blissful boom. Still, some of the numbers are looking good. If you’re scrutinizing the co-op and condo listings, you’ve seen asking prices —even in historically ironclad Manhattan and ever-hot Brooklyn—slide as much as 25 percent from figures in early 2008, when the citywide market hit its peak. And thanks to the Federal Reserve, interest rates are at an astounding low, hovering around 5 percent. Of course, anyone hoping to score a loan must meet stricter financial criteria—but for simplicity’s sake, let’s assume that you do. Should you nab one of the beckoning real-estate bargains?

“Not yet,” says Bill Staniford, CEO of PropertyShark, a website that tracks New York City “for sales” and foreclosures. He, like other forecasters, sees a slippery slope ahead, with prices continuing to drop. While no one can predict when the market will bottom out, Staniford speculates second quarter 2010. “I don’t think real estate’s going to heat up before we get through ’09,” he says, citing cash conservatism and standard-issue fear as reasons why most folks will pass up fire-sale offerings in the coming months. Indeed, Money magazine predicts that New York City will be among the last markets in the country to recover (only Florida and New Orleans look gloomier), with average prices citywide bottoming in early 2011.

Jonathan Bowles, director of the Center for an Urban Future, a Wall Street think tank, believes that the window of opportunity may open earlier in select areas. “For a lot of New Yorkers who have their eye on particular neighborhoods, the time to get a deal might be soon,” he says. Bowles notes that parents who already own a home but hope to trade up to that coveted three-bedroom (uh, two-?) in the down market are in a tricky spot; the dive will hurt as much as help them, since they’ll need to sell before they buy. Lookers unencumbered by that burden, who also have a stable job and access to a liquid down payment, should “be ready to pounce in six months to a year,” he advises. Money recommends that eager buyers negotiate a contract which factors in a projected price drop.

No matter whom you believe, this is excellent news. You have a shot at snagging your dream apartment and time to prepare to make the best deal possible. You’ll want to employ two tactics: First, because it’s the fun part, keep shopping. The closer you are to zeroing in on what you want and where you’re apt to find it, the better the position you’ll be in to jump when the amazing buys appear. (See the next two pages for our bargain hunters’ map of ten popular family neighborhoods.) Next, and we mean now, do all you can to get your ducks in a row. Purchasing a home of your own will never again be as easy as it was during the subprime free-for-all; from here on, the only way to become an ex-renter will be through impeccable credit and an impressive wad of Benjamins.

Which brings us back to those “strict financial criteria” so casually mentioned earlier. “The banks are competing for people with good credit, who are looking to borrow a reasonable percentage of the buy price,” says Madeline Noveck, president of NYC financial planning and investment management firm Novos Planning Associates. In 2009, that adds up to a credit score of at least 720 and a down payment equaling 20 percent or more of the property’s purchase price. After plunking the cash on the table, a family with one wage earner should still have a six-month cushion in the bank; dual-income families, especially those who work in more stable fields, such as teaching and medicine, will have more wiggle room.

As you hit the open houses, snarfing free bagels and enjoying the wide-open spaces, you’ll want to ask yourself, “Would this do for us in five to ten years?” That’s how long you may have to stay to get all of your money back should you sell. Most important, have in your mind a recession-adjusted idea of what your family can afford after the deal is done.

“Mortgage brokers won’t be factoring in how much money you need to be putting away for college and other expenses,” explains Alayna Schroeder, a coauthor of Nolo’s Essential Guide to Buying Your First Home. Noveck, who along with Schroeder advocates a dining-room-table spending analysis for even the most portfolio’d families, notes that cash can be found by moving former “essentials” to the “negotiable” category: “What are you willing to give up or put off in order to be in a neighborhood with good schools?” she asks. “Are you ready to live with a less-than-wonderful kitchen for five years?”

Welcome to the new economy—it’s not so different from the one in which your parents raised you.

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