Coping with a bursting housing bubble

Fred Foster bought a beautiful home in Utica, N.Y., where he thought he and his wife would spend the rest of their lives. Then his job went south -- to South Carolina.

It was a good career move that turned into a terrible financial burden.

Foster's $325,000 house in Utica sat on the market for two years. The closure of a large military base and shutdown of an aeronautical manufacturing company devastated the economy. There were no offers. When one finally came along, Foster accepted it gratefully even though it was almost $50,000 less than he originally paid.

Foster was financially able to get on with his life and buy property in his new city, but nobody likes to lose that kind of money.

"At some point you just have to come to the realization that you've made a bad investment and you have to get out of it the best way you can," he says.

Dealing with boom to bust
Some economists say more homeowners could find themselves in Fred Foster's situation.

Low interest rates and flexible mortgages have fueled a housing boom in the last couple of years, despite a sagging economy. But soaring house prices in some areas, they warn, could turn the housing boom into a bust because few potential buyers can afford what sellers are asking.

If you don't have to move, you probably don't have to worry. Real estate prices are cyclical, affected by interest rates, employment levels and lifestyle trends. Sellers with patience can wait until the market is better.

However, if a move is forced upon you, then a declining housing market can be a crisis. But you don't have to simply go along for the downhill ride in slow real estate market. Here are 10 suggestions on how to come out as financially whole as possible.

1. Price it right.
Diane Saatchi, president of Dayton-Halstead, a real estate company on Long Island, N.Y., offers home sellers some blunt advice: "A lot of people come to us and say, 'I need to net X,' like the buyer is going to care. Properties trade at their market value. They don't trade at multiples of your fantasy. If the property shows well and is priced in the right range, someone will buy it. If it's overpriced, it won't sell."

2. Market aggressively.
Hiring an agent who knows and successfully sells properties in your community is a first step. But California-based mortgage broker Victor Benoun, author of "Your Castle, No Hassle," advises against sitting around waiting for the agent to round up the right person. He says advertise the house yourself in a variety of in- and out-of-area publications. He also suggests building a house-for-sale Web site, putting flyers on bulletin boards and in mailboxes where likely buyers live and contacting corporate relocation offices of nearby large employers.