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From Bottom Up, Signs of Housing Recovery

After years of watching home prices slide, Claudia Ruggiero, a teacher in White Plains, was ready to strike.

She and her husband Michael Johnson, also a teacher, had a 14-month-old son at home and needed a shorter commute. They found a three-bedroom Dutch colonial in Armonk, a neighborhood they thought they could never afford, for a bit more than $500,000.

In a strong sign of recovery in the housing market, cost-conscious buyers such as Ms. Ruggiero have stormed back into the market for lower-priced properties across the New York area in recent months, leading analysts to speculate that the worst of the housing slump may be over.

Across Westchester, the number of buyers in contract to buy homes priced less than $500,000 at the end of 2011 rose by nearly 40% compared to a year earlier, according to a market report issued by the broker Houlihan Lawrence. Sales weakened at higher price points.

Analysts have noted a similar pattern in New Jersey. Sales have picked up due to buyers of properties priced less than $400,000, according to data compiled by the Otteau Valuation Group. The number of such contracts signed during the fourth quarter rose by 11.3% compared to the same period a year earlier.

Analysts said housing-market recoveries often begin at the bottom.

“It is nice when you get the high end of the market doing well,” said Chris Meyers, chief operating officer of Houlihan Lawrence, the largest residential brokerage in Westchester, “but in our experience the strong markets get healthy from the bottom up.”

Jeffrey G. Otteau, an appraiser and housing analyst in New Jersey, said that state’s market had “bottomed out.” He said the surge in lower-end sales strengthened month by month since September. It was, he said, like a “snowball, rolling down hill and gaining momentum” that was likely to continue in 2012.

He attributed the change to an improved economy, with the creation of entry-level jobs triggering home buying by first time homebuyers backed by support from federal housing programs. A bump down in mortgage rates was also a factor, brokers said.

Still, some risks remain, especially the uncertainty surrounding foreclosures, which have been bogged down in courts in the region, analysts say. Mr. Otteau said foreclosure activity is heavily concentrated in specific neighborhoods, especially lower-income urban and rural areas.

Jonathan Miller, an appraiser who prepares market reports for Prudential Douglas Elliman, said there appeared to be a similar pattern of strong lower-priced sales on Long Island, but he said he has not finalized a report on the island for the fourth quarter.

He said that during the fourth quarter of 2011 there were signs of the same pattern in Manhattan, with a rise in market share of less-expensive studio and one-bedroom apartments to the highest level in two years. But Mr. Miller said he believes this activity was a one-time surge due to falling mortgage rates.

In the last year or so, the high end of the suburban market was unusually strong in wealthy neighborhoods within easy commuting distance of Manhattan.

Now, higher-priced sales are lagging. In Westchester, the Houlihan Lawrence report showed a 15.2% decline in pending contracts for homes for $500,000 or more, with the largest decline is homes priced for $1 million or more.

This led to Westchester’s median sale price hitting the lowest level since 2006 in the fourth quarter, $525,000. The median price for all of 2011 was $600,000, down from $630,000 in 2010.

Ms. Ruggiero and her husband live in New Fairfield, Conn., north of Danbury, a drive of at least 45 minutes down Interstate 684 from her school, because they couldn’t afford to live closer. “We were constantly looking for a place that was affordable but within commuting distance,” she said.

They assumed that Armonk was unaffordable. But with Ms. Ruggiero due to return to work after a maternity leave, she looked online anyway: She found a white, three-bedroom house with a stone patio,a large deck and a separate two-car garage.

It had been listed at just more than $564,000, and Ms. Ruggiero said she was told that at the top of the market it would have gone for $850,000. With the help of a Houlihan broker, Aurora Banaszek, they negotiated a contract for $530,000 and are due to close this week.

Also finding just the house he wanted was Raju Pavuluri, a software engineer and researcher at IBM. It is in New Rochelle, where he and his wife, a doctor, rented an apartment.

The house is in a good school district, has a back yard and was in move-in condition. He made a deal to pay $550,000; he said it would have cost $100,000 more a couple of years ago. “It’s a buyer’s market,” he said. “There are many houses to look at.”

But that may be changing. Alfie Rechichi, sales manager at the Katonah office of Coldwell Banker, said her 40 brokers were busy with 18 showings a day just on the firm’s own listings.

“We are going through a shift from a buyer’s market to a more stable market,” she said. “Buyers who are putting in bids of 50 cents on the dollar will learn that it isn’t going to happen.”

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