Epic Home Deals Await the Creditworthy

When Cynthia and Gerald Matthews relocated from Ottawa to Bloomington, Ind., house hunting had some pleasant surprises. “It was much cheaper than we thought it would be,” says Cynthia Matthews, who bought a three-bedroom, brick neocolonial-style house for 5 percent less than the $196,999 asking price and got a mortgage rate close to 4 percent. “To say it’s a buyer’s market would be an understatement.”

People like the Matthewses who survive the scrutiny of mortgage lenders are getting the best deals of the five-year U.S. housing bust—and perhaps the best deals of a generation—after a 31 percent decline in home prices since 2006. It’s the bright side of an otherwise bleak real estate market: Good houses at cheap prices are plentiful, and mortgage rates are at record lows—an average of 3.94 percent for 30-year loans during the first week of October. “It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says Dean Baker, an economist who in 2005 predicted that house prices would tumble. “Prices may go lower, but not by much.”