The housing market slowdown is nationwide, yet it has taken its earliest toll in Midwestern communities where the word "boom" never applied to home prices.
Here in the northern Indiana city of South Bend, where "For Sale" signs sparkle alongside golden foliage in the autumn sun, the median price of a resold home is $101,000 - less than half the national average.
Some forecasters say that coastal communities, from California to the Eastern seaboard, may in the end see the sharpest downturn in prices. But it is this region, characterized by slow job growth and gathering problems in the automotive industry, that has stumbled first. In a business where outright price declines are rare, the Midwest was the first region in recent years to post a drop in prices - with median single-family homes down 2 percent in the second quarter from the same period in 2005.
Is the Midwest leading a national downturn? Prices were still rising in the South, West, and Northeast, although they too may show declines when the National Association of Realtors provides third- quarter numbers this month.
"Those [Midwestern] markets are being affected more by the economy itself ... particularly job cuts," says Brian Carey, an economist at Moody's Economy.com, which tries to model where home prices will go next in US markets. The coasts, by contrast, "had the largest housing boom ever basically. We're starting to see the downside come through now."
The regional and city-by-city differences reveal how, in real estate, it really is "location, location, location" that matters.
In the Midwest, home-price patterns are all about the economy and jobs. Cities such as Detroit, Cleveland, and South Bend are struggling even though they never had a big run-up. In other regions with stronger economies, the housing shift is driven by consumers adjusting to higher interest rates and by speculators who are now backing out of the market instead of bidding prices up.
Some economists believe that, with interest rates apparently stabilizing, the worst of the downturn may be over for most of the nation. But others, including Mr. Carey, say it's likely that the great boom will take longer to unwind. From Merced, Calif., to Naples, Fla., he says many cities could see double-digit price declines that don't end until late next year or even 2008 and 2009.
The uncertainty is greatest in coastal areas and other hot markets such as Las Vegas, due to the unusual nature of their recent price surge.
"This boom that we just went through in housing prices is actually unprecedented," says Jeannine …