Real Estate: Where to Buy and When

June 15, 2007 — -- The falling price of real estate is a topic of much debate and speculation -- and for house hunters, uncertainty.

Will home prices keep sinking? What about rising interest rates and the record-breaking rate of foreclosures? Will potential home buyers miss a golden opportunity if they don't act immediately?

On "Good Morning America," Wall Street Journal editor Wendy Bounds offered advice for anyone in the market for a new home. She said one thing is for sure: Now is the time to start looking.

"Most economists think home prices will keep falling through the end of the year. Mortgage rates are now as low as they have been, but they are still at historically low levels, and they aren't rising much," Bounds said. "It would certainly be a good time to buy in the next six months, especially if you can find a good bargain."

Bounds revealed some of the best cities to look for bargains: Phoenix, Las Vegas, Washington, Tampa and Los Angeles.

She advised that house hunters look for a real bargain, meaning at least a 5- to 10-percent drop in price if the home has been on the market for three to six months. For example, Tampa is a good market for buyers because there's a glut of unsold homes.

Make a Home a Bargain by Asking for Extras

If the price hasn't dropped much, Bounds said buyers should ask for extras to make the house a bargain.

"This is the time to ask for the moon. Don't take a house 'as is.' Ask for money to fix chimneys, landscaping, painting," she said. "In some cases, real estate agents say that sellers are agreeing to pay part of the closing costs or first-year taxes. One seller in Cambridge, Mass., threw in a flat-screen TV as a sweetener."

One tried-and-true method of figuring out whether a house is fairly priced is to compare its price to the sale of nearby homes. Bounds said that to do this right, it's crucial to use recent sales figures that are less than a year old.

"You only want to see sales from the last few months," she said. "The agent should be able to provide these. But you can also look up the prices of nearby homes on Web sites like Realtor.com, Zillow.com, and Housefront.com."

With foreclosures at record levels, those in the market should know if there are foreclosed houses near the homes they're planning to buy.

"That can tend to soften prices for neighboring homes because people with homes in foreclosure sometimes let the properties go into decline, don't keep up the yard, don't fix broken windows, etc." Bounds explained. "It's the 'dandelion factor' -- when people see lots of dandelions growing unchecked in typically well-kept lawns, they know there's trouble. It also means there may be a bunch more houses on the market for sale, which can push overall prices down."

Bounds pointed out that some of the states with the highest foreclosure rates are places where people usually want to live, like Arizona, Florida and California.

To see where houses have been foreclosed, visit Realtytrac.com and Foreclosure.com.