After a lengthy dry spell, Greg and Alanna Smallwood receive a fresh e-mail from their real estate agent. More homes are on the market. Time to hit the trail.

The newlyweds from Margate have been house-hunting since September. At one point, they think they have found "the one" - a new construction in Linwood reduced to $450,000. But when they crunch the numbers, they determine their taxes will be $13,000 per year.

"Astronomical," Alanna realizes, shaking her head.

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When their real estate agent contacts them again in mid-May, they are still optimistic. They would have loved to have found something before their wedding in March, but in this real estate arena, there is no sense of urgency.

That is because the U.S. housing market has been flipped on its roof. National home prices are down 32 percent after peaking in the second quarter of 2006, leaving more homes underwater and causing an upswing in foreclosures.

In Atlantic County, median home prices fell by double-digit percentages in the first quarter of 2009 from a year earlier. While industry experts say the area market has been moving on entry-level properties, buyers are said to have the upper hand - still.

Greg and Alanna, anxious to make a move, would find out soon enough.

* * *

"You're going into this house with an open mind," Greg advises Alanna.

The Smallwoods, in their early 30s, are not first-time homebuyers. But when they bought in 2005, the market was completely different: They had to jump on a house or lose it. They found a small starter home in Northfield, but sold it in 2007 at a slight profit before the market tanked. They moved back into the duplex unit in Margate that Greg owned.

This time around, they want to be able to raise children in the first house they buy as a married couple.

They are typical homebuyers, who the National Association of Realtors say are mostly married, buy a detached, single-family home in the suburbs or a subdivision, use primarily savings to pay for it, and have a median household income of $74,900.

When it comes to the details of the home, the Smallwoods want a basement, a fireplace and - Alanna says longingly - an eat-in kitchen.

They've looked in Northfield and Somers Point, but their target is Linwood, a higher-income, residential city of 7,250.

Greg, a middle school guidance counselor in Brigantine, and Alanna, a math teacher in Avalon, Cape May County, prefer Linwood for its well-regarded public schools.

But it comes at a price: The average property tax bill there increased from $5,336 in 2000 to $8,298 in 2008 - the most expensive in the county and among the highest in southern New Jersey.

On the other hand, the city has not been immune from housing price declines. From March to May, the median sales price for a home was $226,000, a decrease of 27.1 percent compared with the same period in 2008, according to Trulia.com, a real estate search engine.

On a sunny spring afternoon, the Smallwoods arrive at a two-story brick colonial on Wabash Avenue. The city's bike path cuts alongside the street.

"Oh, wow," Alanna says, pulling her sunglasses from her face.

* * *

The 10-year-old house has been on the market for only a week, says the couple's real estate agent, Holly Henry, who grew up in Linwood and sells for Balsley Losco Real Estate in Northfield.

The homeowners are inside when Greg and Alanna get there. The couple likes the colossal closet space.

"Right now, where we are, we're overflowing," Alanna says, cruising through a teenager's bedroom - with the teenager on the bed.

The house is nice, but they're not crazy about the sale price of $479,000 - a notch above their $450,000 limit.

They decide to move on to the second and final house for the day.

It is also a two-story colonial, this time on Kie Tro Drive. Like the first home, it has four bedrooms, two-and-a-half baths. It was initially listed at $449,000 in December, but - languishing on the market - has been knocked down to $425,000.

"It's more the buyers' advantage right now," Henry says.

After touring the home, the couple makes an assessment: The kitchen needs some work. The dark wood paneling in the family room would have to go, appearing straight out of a 1970s "Brady Bunch"-type home. But the house itself is spacious.

"It has a lot of potential," Greg says. "It's just something that will take time."

After discussing it, they decide to make an offer. But with all the upgrades required, they low ball it - to $330,000. They wait.

* * *

The housing market in New Jersey - not as ravaged by foreclosures and falling home prices as other states - is poised for a turnaround within the next 12 months, housing expert Jeffrey Otteau says.

"We're seeing an increasing number of home sales and reducing inventory," says Otteau, president of Otteau Valuation Group, a real estate research and appraisal firm in East Brunswick. "There's fewer houses on the market than two years ago. And we're seeing stabilization of foreclosure activity."

Foreclosure rates fell significantly in May from the prior year - by double-digit percentages in Cape May, Cumberland and Ocean counties - which would mean less inventory on the market and a stability in prices. Only in Atlantic County did the rate increase - by 23 percent - from May 2008 to May 2009, according to RealtyTrac, a California-based company that tracks foreclosures.

For the Smallwoods, owning the Kie Tro Drive colonial is not meant to be. Their offer is about 22 percent lower than the list price and the seller wants to go with something higher.

"Greg was really bummed," Alanna later says. "I was too. But we wouldn't have been able to buy it and put money into it."

Henry shoots them another e-mail. This time, she has four homes to show them, although by now, they can't help but feel disappointed.

* * *

The amply built homes on this tree-lined neighborhood in Linwood radiate prestige. The street signs say Yale, Princeton, Harvard.

Henry leads the Smallwoods through an "as is" single-family home on Belhaven Avenue ("too much work"), then over to one on Schoolhouse Drive ("too close to Route 9") and then to Cheltenham Avenue, in a section of the city near Shore Road known as the "Gold Coast."

Quaint, but "not our style," Greg says.

The Smallwoods are ready to call it a day. But they still have one more stop on nearby Monroe Avenue.

The run-down: The two-story Cape Cod was built in 1951 at about 2,100 square feet, featuring four bedrooms, two baths and a one-and-a-half car garage. The front lawn is neatly landscaped with evergreens and pink and yellow flowers.

If house hunting is like dating, then the other houses were awkward and forgettable. Here, the cream-colored house has pegged hardwood flooring. A curved brick fireplace. A screened-in porch and roomy yard. No eat-in kitchen, but when you're smitten, you can look past that sort of deficiency.

"It has a lot of character," Alanna says.

Henry tells them the home has been on the market for a couple of weeks. The seller is asking $399,900.

After a day of discussing, the Smallwoods know they want the house and put in a bid at a lower price. But unexpectedly, another potential buyer swoops in and the seller calls for a bidding war for the best offer.

Henry says it is not uncommon to get multiple offers on a property that is priced right. She asks the Smallwoods, "Would you be unhappy if you lost this house?"

* * *

The first weekend in June goes by before the seller makes a decision: The house will go to Greg and Alanna.

The two sides agree on an amount at about the list price, although the closing is not until the end of July. (The house last sold in 2006 for $360,000, county sales records show.)

Greg expects to get a 30-year, fixed-rate mortgage at 5.375 percent with Bank of America.

If they were able to buy a house in the spring, they might have been able to lock in a historically low mortgage rate below 5 percent. But after nine months of searching, seeing about 20 homes and overcoming setbacks, this is the house they have been hoping for.

There is no hint of buyer's remorse when the couple sees the house for only their second time during the home inspection process.

"We knew right when we walked in," says Alanna, admiring the outside.

The inspector advises that the windows be upgraded, but the house appears to be structurally sound. Greg, trailing the inspector closely, is thinking of the home's resale value, too.

Just then, rain clouds settle in. The long-ago dry spell, when the couple was anxious to find a house, is forgotten. Alanna heads for the front door and disappears inside, where Greg is waiting.

E-mail Erik Ortiz:

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