Open Market

With more than $100,000 in the bank and no deadline looming over them, Siobhan and Peter Kinney started house-hunting full of optimism. High school sweethearts married for three years, they needed space for their 13-month-old and a newborn but were prepared to wait for a house that felt just right.

As it turned out, their patience, and their bank account, were not enough. Months of fruitless searching left them reeling. Priced out of Weymouth, their hometown, they widened their search before finally settling on a Colonial in East Bridgewater.

“We never imagined we'd leave Weymouth,” Siobhan Kinney says. “But to see what you could get in our price range was outrageous.” So despite having cleared $120,000 from the sale of their first house, she, her husband, and their children found themselves living with her parents in Weymouth as their search dragged on.

Like many buyers these days, the Kinneys thought the economic downturn would have made things easier, that cheaper houses would be the silver lining of the recession. After all, that's what happened during the recession of the mid 1980s. Interest rates shot to 15 percent. Real estate prices plummeted.

Not this time. Today, interest rates are hovering at 7 percent. And, except at the very high end, prices are stubbornly staying put.

Don't put away that checkbook yet, though. Buyers are no longer facing the market of the last two years, when they had to make half-million-dollar offers within minutes of seeing a house, and bidding wars drove prices higher. Houses are staying available longer, bidding wars are fewer, and prices are more realistic. Gone are the days when sellers could name their price and get even more. These days, it's a game of chicken, with buyers and sellers waiting to see who flinches first. And with a dearth of houses on the market, plus low but rising interest rates, holding out for cheaper times doesn't seem to be a practical option.

If Boston's prices weren't the second highest in the nation (San Francisco's are first), it would seem that some semblance of balance had returned to this chaotic market. Houses aren't appreciating at the galloping rates of the past two years, and listing prices aren't escalating at the same fast clip. In some sectors — notably the million-dollar-plus end of the spectrum — prices are actually dropping. What's certain is that buyers, having recovered from a brief, post-September 11 retreat, are out in force, fueled by pent-up demand and an itch to invest their money in something other than the stock market.

“The spring is going to explode,” says Barbara Bee, district manager for zipRealty's Boston office. “It's a more balanced market, which is an equation for increased transactions. Both buyers and sellers will be making out well.”

Sellers, at least. For buyers, it depends on where they look. David Eisenthal and Talya Westbrook searched for months in Roxbury and Jamaica Plain, but their incomes never added up to a single-family house in those neighborhoods. “We've got two master's degrees and we still couldn't afford it,” says Westbrook, who's completing a master's in classical singing at UMass Amherst. “We left Boston for Worcester because we were priced out and for commuting reasons.”

Ideally, she says, the couple wanted to move to Roxbury's Fort Hill neighborhood. But they watched house after house there slip away because the $400,000 asking prices hovered just beyond their reach. Those prices were finally enough to drive the family to look west of Worcester, instead of east. “We were looking for a racially diverse area,” says Westbrook. “But we started to think that if we had to pay that much money, we might as well go somewhere else and get more house.”

Judging solely by the median prices in Greater Boston, there should be a house somewhere for Eisenthal and Westbrook around their target of $350,000. But, they didn't find one that met their needs and, instead, settled in a home in West Brookfield. The problem is that house values have continued to appreciate. Over the past decade, houses in this area have increased in cost by a dizzying 89 percent, according to residential real estate analysts Case Shiller Weiss. Such extraordinary leaps have been delighting sellers, while leaving buyers to wonder when they'll catch a break.

There are a few signs that such a break is on the horizon: The inventory of houses on the market is building, the number of days they spend there is growing, and the “bid-ask” spread — the difference between what sellers are asking and what buyers are offering is widening. In 2000 a house in Greater Boston stayed on the market an average of 85 days. Last year the average house remained for sale for 118 days.

There's a hitch: Despite these classic indicators of a shifting market, prices themselves have yet to fall. “We've got an environment that's economically favorable to housing,” says Karl Case, a Wellesley College economics professor. “If the economy stays in a downturn like it did in 1990-1991, prices will crack.”

That's a big “if,” since forecasters don't expect this recession to last long enough for this to happen. Federal Reserve Board economists have predicted that the economy should be in recovery by summer.

If the floor really is going to drop, savvy sellers aren't waiting around for it to happen. In February, Jo and Wally Roenick sold the Marshfield Colonial where they'd lived for 17 years for $362,500, more than twice what they paid for it in 1985.

“We had no idea we'd be able to sell this fast or this high,” says Jo Roenick, who is downsizing with her husband after raising two sons — National Hockey League star Jeremy Roenick of the Philadelphia Flyers and his brother, Trevor, who plays hockey in Europe — and buying a condo in Pocasset.

Patrice Drew wanted to move in the other direction, toward Boston. After 30 years in Carlisle and Concord, she bought a bungalow in Arlington. For $338,000, Drew found a two-bedroom at the end of a quiet, dead-end street. The same house sold for $235,000 in 1997. “I've owned four houses in the past five years,” says Drew, who watched the market rise steadily over the course of her transactions. But rather than fretting over the boom, she looked for a place where she really wanted to live. “It's your life right now, and how you live it that matters — much more than the ups and downs of the real estate market,” she says.

Case, the Wellesley economist, agrees. “Houses are a consumer durable,” he says. “We don't worry about the fact that our cars don't appreciate when we drive them. The biggest part of a yield when you own a house is the service that house provides.”

Then again, Case himself has benefited twice from Boston's real estate boom. He and his wife bought a house in Wellesley 25 years ago for $50,000 and sold it in 1991 for $230,000. They then paid $392,000 for a Cape that's now assessed at $715,000. “I've made more money sitting in my house than teaching at Wellesley,” he says. “Housing is a very good investment.”

As with any investment, though, timing is everything in real estate. Knowing when to make the big purchase is the question that torments every buyer. After a severe slowdown in buying after September 11, real estate agents report that buyers have come out spending. “I have to read the paper to remind myself that we're at war,” says Ann Harrington, owner of Lighthouse Realty in Weymouth. “Open houses are like Irish wakes. People are lining up to get in.”

If you need a house, say experts, buy it. There's no evidence to indicate that prices will weaken. “The people who are waiting for prices to drop may be strongly disappointed,” says Fred Meyer, owner of University Real Estate in Harvard Square. Adds David Lereah, chief economist for the National Association of Realtors: “There's no price bubble that's going to burst. You could get some natural softening in prices temporarily, but then prices will come back up again, because the fundamentals for the market” — short supply and low interest rates — “are so good.”

But with the days gone when buyers would pay any price and sellers had to fight off bidders, real estate agents say they have been pricing houses more aggressively to avoid underbidding and long waits on the market.

“When I price a house now, I'm very careful,” says Donna Chase of Realty Executives in Norwell. “Instead of allowing the sellers to price it a little bit higher, I suggest we put it right at what that house is worth. If we get more than one offer, we get a bidding war and the seller makes out better.” Such bidding wars, she admits, are no longer certainties, which should mean less pressure on buyers to make decisions on the spur of the moment.

That's the experience Alan Zall has been having as his family looks to move from Wilmington to Melrose. He and his wife, Karina, sold their Wilmington house for $440,000 — almost $200,000 more than they paid for it in 1997 — and are shopping in Melrose. They'll move in with Karina's parents until the right house surfaces.

“The prices last year were a little scary,” Zall says. “Now they seem a little more realistic. You don't have to overbid just to be considered anymore.”