Quotes of the Day

The stalled economy, expiration of homebuyer tax credits, marked-down home prices, stubbornly high unemployment and concerns about a double-dip recession all leave prospective homebuyers wondering if now is the time. Is it time for renters to convert to buyers and for existing owners to grab that dream home on the cheap? Or will housing get even cheaper?

Home prices have plunged about 30% from their mid-2006 peak on average, with some areas, like Las Vegas, seeing prices plummet in excess of 60%. At the same time, foreclosures have continued to rise in 2010 from their 2009 historic highs and have pressured prices further.

Buyers who are eyeing condos and townhomes in particular might want to check out Trulia's latest rent-vs.-buy index, which tracks 50 of the country's largest markets. It offers a breakdown on cities that offer the best buying opportunities and those that are still renters' markets.

According to Trulia, a real estate search engine, the best markets for bargain condos are Arlington, Texas; Fresno, Calif.; and Miami. Others in the top 10 include Mesa, Ariz.; Phoenix; Jacksonville, Fla.; Detroit; Columbus, Ohio; El Paso, Texas; and Nashville. Some of these cities are among the markets hit hardest by the boom-and-bust phenomena, foreclosure crisis and job layoffs, says Tara-Nicholle Nelson, consumer educator at Trulia.

The firm calculates the price-to-rent ratio by comparing the average listing price of a condo or townhome with the average rental rate of two-bedroom apartments and condos on Trulia. Basically, the calculation takes the median price of the condo in a market and divides it by the annual rental payments generated on a similar property.

When it comes to renting, New York City real estate ranked first on the list as being cheaper to rent than to own although rents there have been on the rise recently. The Big Apple was followed by Seattle and Forth Worth. Rounding out the top 10 renters' markets are Omaha; Sacramento; Kansas City; Portland, Ore.; San Diego; San Francisco; and Boston.

Nelson says she was particularly surprised that condos in Omaha, Fort Worth and Kansas City were more expensive to own than to rent. She attributes this to lower unemployment rates and affluent families paying up, which kept condo prices up. Some cities avoided the housing bubble, she says, another reason prices have held.

Still, even if the broad rent-vs.-buy ratio favors renting, prospective buyers should take into account other factors, such as how much prices have fallen from their peak, potential tax advantages and the length of time the buyer plans to live in the property, Nelson cautions. For someone who isn't looking to flip the property for a quick buck — those days are over, aren't they? — and plans to stay in a home for 10 years or until they're hauled off to the grave, buying now could make financial sense even in some of the renters' markets, she says.

In recent months, there have been signs that housing may finally be bouncing along the bottom. The Standard & Poor's/Case-Shiller composite home-price index shows prices rose, albeit modestly, for the past few months, and some major lenders, such as Bank of America, GMAC Mortgage and JPMorgan Chase, have put foreclosures on hold in 23 states over record-keeping issues. All of this indicates price declines may stall — at least temporarily.

But Alex Barron, founder of Housing Research Center LLC, remains bearish on buying. He expects prices to fall another 10% to 30% before the sector bottoms out. Inventory has increased since the expiration of the homebuyer tax credit, he notes. Barron speculates that once mortgage rates start ticking up, home prices will likely tumble. "Prices will correct 10% for every one percentage point the mortgage rate goes up," he says.

Foreclosures are also pressuring prices. Barron notes that bank repossessions totaled 718,000 in the first eight months of 2010, up 23% from the record 584,000 during the same period a year ago. He speculates that once the current foreclosure suspension is lifted, a flood of foreclosures could hit the market. That added supply will likely cause another correction in home prices.

• Janet Morrissey
• Interested in getting back into real estate? Here's a guide to the best markets for bargains