For house sellers and buyers alike, this has been a winter of discontent, chilled by Himalayan mortgage rates. To the dismay of sellers, house prices are faltering. To the dismay of buyers, that’s not making the monthly payments any more affordable. Yet there are opportunities for both, as the articles and boxes in this special report make clear. Below: today’s best choices for buyers and renters. On page 48: how to bargain in this buyer’s market. On page 46: where house prices are up most and least. On page 50: who’s got the mortgage money. On page 52: how to sell when the market’s against you. On page 54: how the misnamed mobile home is changing for the better. On page 58: some hard-won advice on dealing with home improvement contractors. And on page 66: one family’s flowering good luck — so far — in the real estate market.

In Chicago, where you can trade commodity futures on everything from potatoes to plywood, residents of the Carl Sandburg Village apartment complex have come up with their own unofficial futures transaction: the condominium contract. Sandburg Village is converting from rentals to condominiums and is offering tenants a chance to buy their apartments at a discount. Some outsiders are so eager to get in on the deal that they are bidding as much as $2,000 for sublets that give them the right to buy.

In Chicago, as in most other cities, housing is a commodity that’s easier to buy than rent these days — at least for those who can manage the monthly payments that go with towering mortgage interest rates. Condominium conversions are part of the problem as well as part of the solution. They have helped make rental apartments increasingly scarce and expensive. But they may offer the best chance to buy a place you can afford in a good location.

Out the window

First-time buyers still intent on acquiring a single-family house face the frustration of shopping in a market where prices have leveled off but mortgage lenders demand heavy down payments and record-high interest. The house hunter may have to scale down his dream to a smaller house or a less desirable neighborhood. For established homeowners who can afford a bigger house, the picture can be brighter. A buyer’s market should persist for the next few months with considerable leeway to negotiate (see the next story).

In the 1980 housing market, old budgetary guidelines have gone out the window. Lenders and borrowers are increasingly willing to exceed the traditional spending limit on mortgage payments; it used to be 25% of income before taxes, but now it’s 28%. The Federal Home Loan Mortgage Corp., a government-sponsored agency that buys mortgages from the original lenders and sells them to investors to keep mortgage money flowing, now suggests the 28% limit. And its guidelines permit still higher limits for buyers with little or no income committed to paying off other debts.

Therefore, by cutting down on your debts you can greatly enhance your chances of getting a mortgage. “Try to send the loan committee a clean report,” says Michael Sumichrast, chief economist for the National Association of Home Builders and co-author of The Complete Book of Home Buying (1979). He goes so far as to suggest that if a young couple are borrowing down payment money from their parents, they might divert a little of it to pay off existing debt.

Whether you’re a confirmed renter, a first-time buyer or a homeowner who has been gazing longingly at houses in higher-priced neighborhoods, here’s what you are likely to find.

RENTALS

Although the national vacancy rate is the lowest since that statistic was first collected in the 1950s, the availability of apartments for rent varies greatly from city to city and even from one neighborhood to another. In some Sunbelt cities, including Houston and Phoenix, plentiful financing and the absence of rent controls have kept builders at work putting up new apartments. Thus two-bedroom units often are available for around $300. In the Northeast, the Midwest and California, however, apartment shortages have resulted in increasingly high rents. Scarce two-bedroom apartments in chic parts of San Francisco, Chicago and Boston often rent for $750 a month or more, in some cases up 20% from a year ago.

Landlords in many cities have been playing catch-up after a decade when rent rises lagged behind the overall rate of inflation and behind heating, utility and maintenance costs in particular. In response to tenant protests, many cities are imposing rent controls. That has spiked developers’ plans for new apartment houses and has sped the conversion of older apartments to condominiums. To make matters worse, the sharp rise in the number of working women and divorced couples has multiplied demand for rental housing.

High rents and low vacancy rates near the center of town have dispersed renters in some cities to less fashionable locations farther from their jobs. By moving from Manhattan to Queens in New York City, for instance, or from the Near North Side of Chicago to the northwest corner of the city, you often can rent the same space at 60% to 75% of the mid-city price. But even in outlying areas, good apartments often change hands without being advertised. So if you’re looking for an apartment, spread the word among your friends.

CONDOMINIUMS

Condominiums can provide both an affordable foothold in the real estate market and the tax advantages of ownership. Condominiums can be units in apartment buildings, attached townhouses or even clusters of separate houses. Each condo owner has title to his own living space and shares ownership of common space — which often includes a swimming pool, tennis courts or other recreation areas. Ownership of cooperative apartments, found mostly in New York City, works similarly in practice. Technically, though, a buyer gets shares in the building corporation rather than owning his apartment.

In Chicago and Boston, condominium apartments away from the most fashionable neighborhoods can still be found in the $50,000 price range. However, some buyers find that they can do almost as well in the center of town as on the outskirts. When her apartment house in a Boston suburb was converted to a condominium last year, Nanci Rosenberg, 30, a school administrator, balked at the $58,000 price. She found a condo in Boston’s convenient Back Bay for only $4,000 more.

There is no shortage of condo conversions in most areas. Advance Mortgage Corp., a Detroit-based mortgage banking concern, estimates that 145,000 apartments across the country were converted to condos in 1979 — with conversions especially numerous in Dallas, Detroit, Los Angeles and South Florida. Advance Mortgage predicts the same number of conversions in 1980.

Condo hunters who spot buildings ripe for conversion can sometimes rent an apartment in time to get in on the tenant’s discount. Carl Sandburg Village’s prime location on Chicago’s Near North Side is what has put a premium on pre-conversion sublets there. Some tenants simply can’t afford to buy their apartments. Dawn Rosten, 27, the flight attendant on our cover, solved that problem by letting a woman who had shared an apartment with her stay on as a tenant. Ms. Rosten got a 15% discount and bought the two-bedroom apartment for $78,000. Her tenant’s rent goes toward the $938-a-month mortgage and maintenance payments.

For some people stymied by the cost of financing, the answer may be a condo developer who holds mortgage commitments from a lender. For example, a conversion project in La Habra, Calif., just south of Los Angeles, is offering mortgages with down payments of 5% or 10% at the prevailing 13% interest rate. If low income disqualifies a young buyer from getting a loan on his own, the converter, Broadmoor Development Co., sometimes encourages him or her to find a responsible cosigner, perhaps a parent or relative. The cosigner must keep up the payments if the borrower falls behind. One-bedroom apartments in the La Habra project sell for $48,000 and two-bedroom units for $55,000. One-family houses in the same area sell for at least $100,000.

Mark Cohen, vice president of condominium conversion for Broadmoor, says condo owners frequently trade up to houses. “For many people, buying a condominium is the only way they will ever get into the housing market,” Cohen adds.

For more and more people, though, a condominium home becomes a permanent address. Researchers at San Jose State University are beginning to detect a change of attitude about home ownership, based on the discovery that condominium living liberates dwellers from the work and worry of a house and lawn and often puts them closer to their jobs. A study of 825 women in the San Jose area, including some who work and some who don’t, found those in condominiums to be happier with their living conditions than those caring for houses. “The condominium may well be more than just something people have to learn to settle for,” says Professor Daniel Garr, one of the researchers.

HANDYMAN SPECIALS

Worries about gasoline have put new gloss on restoring run-down city properties. “The trend to revival of inner-city areas is almost universal and affects more areas within each city,” Advance Mortgage reported recently. Some people fleeing high rents have renovated property in neighborhoods once thought hopeless — even recently crime-ridden slums such as Bedford-Stuyvesant in Brooklyn. Structurally sound houses in run-down neighborhoods of some cities are available for $30,000 or less, but once a rehabilitation trend gets going, prices shoot way up. Unrenovated houses in formerly seedy areas of San Francisco now sell as high as $125,000.

Renovating in difficult neighborhoods obviously is not for everyone. But, says Neal Bailey, a San Francisco real estate broker, those with a pioneering spirit “will get their money back by going into an undesirable area.”

SUBURBAN STARTERS

For people in search of their first suburban house, the situation is tough but not impossible. Inflation wrecked many house hunters’ hopes last year. In the 12 months through December 1979, the median-priced U.S. house went from $50,900 to $56,500. The average mortgage rate went from 10% to 12 ½ %. The monthly payment, with 20% down on a 25-year mortgage, rose 33%, to $493. Even so, a family with a $21,100 annual income could still meet the higher payment with 28% of their pretax income.

Young buyers whose incomes fall short need not despair. If there’s a reasonable expectation that they are on their way up, they may qualify for a Federal Housing Administration-insured graduated-payment mortgage. Instead of keeping payments level for the life of the mortgage, this plan sets payments lower at the start and increases them annually for five to 10 years. About 30% of all FHA mortgages now being issued have graduated payments, and the plan may soon spread to conventional loans. To find such a mortgage now, ask real estate brokers for names of lenders granting FHA mortgages.

One lower-priced possibility for suburban buyers who want to tend their own patch of grass may be the attached townhouse. Often the same in appearance as a condominium, a townhouse gives you most of the joys — and responsibilities —  of house ownership. In the Washington, D.C. suburb of Springfield, Va., 2,000-square-foot townhouses are selling for $70,000. Detached houses the same size across the road cost $100,000.

No flood of new houses or new mortgage money is expected to come along soon to relieve the strain on first-time buyers. The supply of new houses is expected to be down this year, with builders starting about a million one-family houses, compared with 1.2 million in 1979. But forecasters don’t expect a startling slowdown like that in 1974, when mortgage money became almost totally unavailable. Government policies that are keeping some mortgage money available — a moratorium on state interest ceilings and a slackening of the reins on savings deposit interest rates — also will keep interest rates high.

There is talk again, as in 1974, of “no frills” houses. Buyers spurned the idea back then, but Jean Youdan, a Houston broker, believes some people now are being forced to settle for smaller, lower- priced houses than they really want. In their favor, small houses can seem attractively economical to heat in a time of rising fuel costs.

The prospect of endlessly higher petroleum prices works to some families’ advantage. While housing values rise close to cities, bargains may appear farther out for those who don’t have to commute all the way to town. “Especially for families with three or four children, I think the best values are in the farther-out suburbs,” says Albert Lowry, author of real estate investment books.

TRADE-UPS

Brokers in most cities report seeing fewer homeowners these days who want to switch to a bigger house with that game room, extra bathroom or swimming pool they have been wanting. Longtime owners with heavy paper profits in their present houses are in a good position to trade up — provided they can find a buyer for their present house in today’s slack market. Another inducement is that much of the cost of a new and larger mortgage is tax-deductible interest.

But if your strategy is to trade up mainly to beat inflation, you may be disappointed. Housing economists and brokers expect a 10% increase in house prices this year — less than the probable rate of inflation. Many forecasters — including some real estate people — doubt that houses and condominiums in the years ahead will keep up the dizzying price rises of the late 1970s.

“In the decade of the 1980s, I think housing is going to share the title of best investment with common stocks,” predicts Jack Carlson, executive vice president and chief economist of the National Association of Realtors. Families about to stretch their budgets to buy more house than they really need should at least take a close look at investment alternatives.

In Houston, one of the few places where rentals remain in good supply, Stephan and Sherri Revak pay $355 a month for this four-room apartment.

Pointers

Where house prices rose most and least

The value of the average U.S. house grew 14% last year. But as these tables attest, there were huge deviations from that average. “Guys are standing in line to buy a piece of Hawaii,” exults Mike McCormack, owner of Honolulu’s largest real estate brokerage firm. Some condominiums that sold for $85,000 to $100,000 during the planning stage were worth $150,000 when they were finished 18 months later, he says.

To pinpoint the areas where house prices went up the most and the least in 1979, Money enlisted Runzheimer & Co., a consulting firm that specializes in cost-of-living analysis. In 160 metropolitan areas, Runzheimer zeroed in on communities where the average family income is around $30,000 a year. Using data from real estate appraisers and other sources, Runzheimer compared prices of one-family houses in December 1979 and a year earlier.

Money then interviewed scores of real estate brokers and mortgage lenders to get a fix on the average price in each community for a decent-size seven-room house: around 2,000 square feet of living space, including three bedrooms and two baths.

In places where appreciation was highest, several factors kept the demand strong. Building and zoning restrictions helped account for rapid price rises in Honolulu, Santa Barbara and Seattle. A scarcity of good land in desirable neighborhoods was a major factor in Charleston, W.Va. Rapid population growth exerted upward force in Miami, Tucson and Houston. For example, 50,000 people a year move to Houston.

But in many other cities, soaring interest rates cut house buying drastically in the fourth quarter of 1979 and weakened prices enough to erode strong gains earlier in the year. In Baltimore, says real estate broker Dan Freedman, many houses were recently selling for just about what they would have brought in the spring of 1979. Observes Lester Glickman, president of the Real Estate Board of Metropolitan St. Louis: “People in our business have to get accustomed to working again. It isn’t like 1978, when everything was falling in our laps.”

Some brokers disputed the Runzheimer findings, but most were content to write off 1979 and look optimistically ahead. After all, says Rex Dowtin, president of the Asheville, N.C. Board of Realtors: “People still have the need and desire for houses.”