(MONEY Magazine) – Ah, spring! Lilacs are in bloom, your hometown baseball team still has a mathematical shot at the pennant, and all across our fair land the mating call of that persistently optimistic species, Brokerus real estatus, once again fills the air: ''Now is the time to buy a home. Cheep. Now is the time to buy a home. Cheep, cheep. Now is the time to buy a home . . .'' Same old rites of spring? Not this time. In many cities around the country, now is the time to buy a home. Cheap. Cheap. In 82 of the 96 metropolitan areas surveyed by the National Association of Realtors, inflation-adjusted home prices at the end of 1990 were actually lower than they were the year before. At the same time, though, the long, agonizing decline in home values seems to be ending, even in some of the nation's hardest-hit markets. In San Francisco, where sales plummeted 22% last year, some brokers report that they are writing contracts at the same rate as at the market's peak two years ago. In battered Boston, pending sales -- that is, deals in which a bid has been accepted but the sale hasn't closed -- zoomed 52% in the first 10 weeks of this year, compared with the same period in 1990. And nationwide, sales of existing homes shot up 7.9% in February, the first monthly increase since November and the biggest in nearly five years. Still, few experts foresee an imminent replay of the soaring '80s (though many homeowners are optimistic, judging from the results of our subscriber poll on page 86). For example, the WEFA Group, an economics consulting firm in Bala Cynwyd, Pa., forecasts an after-inflation rise of just 2.5% over the next two years (for city-by-city projections, see the table on page 83). Even the preternaturally upbeat NAR expects the median U.S. home to climb to only $95,600 this year -- a rise of one-half of 1%. Says WEFA's housing economist John Savacool: ''I wouldn't hold my breath waiting for a boom.'' What these reports signify, perhaps, is a widespread return to steady housing markets. The sales revival means you can finally make a purchase with reasonable assurance that prices will not go into free-fall the minute you sign a contract. Or you can continue to shop without worry that home prices will spiral out of reach if you don't buy immediately. This special report will tell you how to turn this evolving market to your advantage, whether you are a first-time buyer, a homeowner with a mind to trade up, or a shopper looking for a vacation retreat. Even if you plan to stay put, there are opportunities to be seized. Now may be a terrific time to renovate, for example. Though building contractors are finally emerging from their worst slump since 1982, many are still discounting their rates by as much as 10%. You'll find a thorough look at home-renovation strategies in the story beginning on page 92. As always, however, it is dangerous to extrapolate from national data to your own market. To gauge the trend in home values in your area, ask your local real estate board for figures on sales volume. If the number of sales is headed up -- or down -- from quarter to quarter, prices should eventually follow. You should also check the number of days that the average house sits on the market before selling. If that number is heading down, sales and eventually prices should rebound. With those guidelines in mind, here's a rundown of ways in which you can capitalize on housing's comeback: -- Buying your first home. At the end of last year, the NAR's affordability index for first-time buyers hit its highest level since Jimmy Carter sat in the Oval Office. According to the index, anyone with the median income of young families currently renting -- $24,428 a year -- has 81.5% of the income needed to buy the median-priced starter home costing $77,900. In 1981, by contrast, the typical young renter had less than half the necessary income. ''The combination of low mortgage rates, soft prices and sellers' willingness to make concessions are giving first-time buyers a wonderful window of opportunity,'' says Peter G. Miller, author of Buy Your First Home Now (HarperCollins, $8.95). Donna Saligan, 31, and her husband George Prutting Jr., 32, were among those to scoot through that window this past November. Scared off by high prices in central New Jersey's Burlington Township for two years, the couple were finally able to get the house they wanted at a price they could comfortably handle -- $159,000. They figure that just a year ago a house comparable to their brand-new 2,000-square-foot, three-bedroom contemporary would have run almost 20% more -- or roughly an extra $30,000. Although they are better off than most first-time buyers -- their combined income of $85,000 is 3 1/2 times the median income of young renters -- the couple worried about meeting mortgage payments if one of them is laid off. But a special ''Peace of Mind Guarantee'' promotion, one of the many deals that cash-strapped developers are offering, eased those fears. Under the program, the builder agrees to make mortgage payments of up to $1,500 a month for as long as six months if a buyer is laid off within a year of purchase. ''That clinched it for us,'' says Saligan. ''We figured that if we run into trouble, at least now we've got a safety margin.'' For most first-time buyers, however, the biggest problem is to come up with the cash for the down payment and closing costs. According to the 1990 Chicago Title & Trust Co. survey of home buyers, only 78% of the average first-timer's down payment came from his own savings. Loans or contributions from relatives made up most of the rest. One solution: find a low-down-payment mortgage. Despite tighter scrutiny by lenders since the S&L debacle, many lenders will gladly loan 90% or more of a home's purchase price. Federal Housing Administration guaranteed loans, for example, require a down payment of only 3% of the first $25,000 of the sales price and 5% of the rest. Though FHA mortgages are available nationwide, the maximum loan amount ranges from $67,500 to $124,875, depending on the level of home prices in your area. -- Trading up to a larger house. When the Washington, D.C. housing market tanked last year, the prices of trade-up houses costing $250,000 or more were hammered down 20% in many areas -- about twice the price drop on less expensive starter homes. Many other cities witnessed a similar pattern as potential buyers of more expensive properties, unable to sell their present houses, couldn't come up with large enough down payments. As a result, trade- up homes constitute some of this market's best bargains. But there's an obvious catch-22: you may be unable to unload your current homestead without selling at a discount. If that's what's holding you back, rethink your situation. Chances are what you save on the price of a trade-up may more than compensate for any price cut you take on your present home. Consider the trade that Frank Martinez, 44, and his wife Stephanie, 30, pulled off last December when they moved up to a 2,600-square-foot, three- bedroom ranch in Shady Oaks Estates, a subdivision 10 miles outside San Diego. The couple had to accept 13%, or $29,000, less than the $229,000 asking price on their old house, a 1,400-square-foot starter home in Rancho Bernardo, Calif. But softness in the trade-up market forced the seller of their new home down to $286,000 -- a whopping $54,000 off the original listing. ''What we lost on selling our old house we more than made up for on the buying end,'' says Frank. ''As far as we're concerned, we stole this place.'' -- Bottom fishing in repos. Intrepid home shoppers can search for bargains among the huge inventory of repossessed homes owned by the U.S. Government. The Department of Housing and Urban Development has more than 40,000 homes for sale, for example, and the Resolution Trust Corporation -- the federal agency that sells off houses once owned by insolvent thrifts -- is currently peddling more than 13,800 single-family homes and 5,300 condominiums. While not every property in the federal inventory is a bargain, careful shoppers can grab a home at a discount. For example, last November, Darren Dixon, a 29-year-old accountant for a Phoenix software company, found his first home at an RTC auction. The price: $95,000, or 21% below the $121,000 at which his mortgage company appraised the home a few weeks later. ''I couldn't have afforded this house without the RTC,'' says Dixon. Keep in mind that buying at an RTC auction involves several risks. If your bid wins, you must immediately hand over a cashier's check for around $2,000. If you change your mind or fail to get financing, you forfeit the money. Most often, the feds take no responsibility for the home's condition either. ''The auctioneer told us that if the house breaks in half after you buy it,'' says Dixon, ''you own both halves.'' The RTC also sells houses as other sellers do -- by listing them with brokers. Although the RTC may seem to be unwilling to dicker, don't believe it. ''You should negotiate with them just as you would with any other motivated seller,'' says Carolyn Janik, co-author of How You Can Profit from the S&L Bailout (Bantam, $21.95). To find out about government-owned houses for sale in your area, call the RTC at 800-782-3006 or the HUD field office nearest you. Check your local newspapers as well for notices of banks, S&Ls and developers selling homes at auction. -- Shopping for vacation-home bargains. The recession, overbuilding and a 1986 tax law that made it tougher to write off rental losses have created a red-tag sale on second homes, knocking down prices as much as 20% in vacation areas from Maine to Arizona.

Though most analysts expect the slump in second homes to continue for the next couple of years, many see demand picking up again after that. One compelling reason: the same baby boomers who triggered the '70s housing boom are now getting into prime second-home buying age -- 45 to 54 years old. During the 1990s, the number of households in this age group will jump 43% to 20.7 million. But there are no guarantees that the aging of the boomers will translate into a rebound in second-home prices. So you should buy a second home only because you want to enjoy it or eventually retire to it -- not because you think it will yield fabulous returns. To increase the likelihood of appreciation, focus on the part of the vacation-home market that's likely to see the strongest demand: year-round resort areas within two or three hours of a large city. Says Kenneth Bleakly, director of GA/Partners in Atlanta, the real estate consulting arm of accounting firm Arthur Andersen: ''People want a getaway they can escape to a few weekends a month, not just once a year on vacation.'' -- Refinancing your mortgage. In mid-February, when interest rates on 30-year fixed-rate mortgages hit 9.4% -- which, except for 12 weeks in 1987, was their lowest level since 1978 -- homeowners rushed to refinance. Says Mortgage Bankers Association economist Rob Rosenblatt: ''Nationwide, more than 30% of the mortgages applied for through mid-March were refinancings -- about double the level from last fall.'' But no sooner had the refinancing wave begun than rates began edging back up. By the end of March, fixed-rate loans were pushing 9.7%. Though climbing rates don't automatically rule out refinancing, they make it far less appealing to homeowners with a mortgage rate below 11.7%. The reason: to recoup closing costs out of the savings from your new, lower mortgage payments within five years, you generally need to refinance at a rate at least two percentage points below your current one. Still, refinancing may make sense in some cases even if your new rate is not that much lower. If you have an adjustable-rate mortgage, for example, this is a good chance to switch to a fixed loan and lock in a rate of less than 10%. You might also consider refinancing if you have borrowed substantially against a home-equity line of credit. Since many home-equity lines now carry interest rates of prime (now around 9%) plus two percentage points, you can save on interest costs and monthly payments by refinancing with a lower-rate mortgage. One caveat: if you are a recent buyer, don't be surprised if a lender is unwilling to refinance. The reason: much of your equity may have vanished. ''We're turning down some people who bought with small down payments in the past year or two because the new appraisals are coming in at or below the original mortgage level,'' says Jim Masters, head of residential lending at the Federal Savings Bank in Waltham, Mass. If you are in that unfortunate situation, your best hope is that brokers' claims of a comeback in home values will turn out to be true soon. So repeat after me: ''Now is the time to buy a home. Cheep. Cheep . . .''