On Halloween, Radar Logic published a new compendium of housing for the year ending in August.

The results were frightening: House prices have held up in just a precious few cities (Milwaukee, up 3%; Columbus, flat; Charlotte, down 3%). All the big California cities tanked, falling 23% to 28%. Prices in Phoenix and Vegas dropped 29% and 30%. Even prices in resilient New York City are off 7%.

These kinds of price declines in housing are unprecedented. Our friends at Zillow.com reported on Oct. 29 that half of American homeowners believe their residences are worth just as much or even more than they were worth a year ago.

Forbes has assembled a panel of real estate experts to discuss the current markets. A lively e-mail exchange was the result, with picks in both residential real estate and stocks. Joining us were Spencer Rascoff of Zillow.com, Michael Feder of Radar Logic, Donald Trump Jr. of the Trump Organization and Peter Slatin of Real Capital Analytics. The moderator, Stephane Fitch, covers real estate for Forbes magazine.

Spencer Rascoff, Zillow.com: I do think this is a great time to be buying residential real estate, with two caveats. First, you need financing, which is much more difficult than in the past. Second, you need to be smart about it. The good old days when anyone could make millions flipping homes in their spare time are over.

I have four friends who have raised investment funds in the last few months to buy up residential real estate--one in Miami, one in San Diego, one in New York/New Jersey and one in Seattle. It's a great time to be doing this, if you're sharp and well capitalized.

Michael Feder, Radar Logic: Regardless of whether or not you are a well-off Forbes reader, now is a fine time to consider purchasing a home. The questions remain: Where, at what price and on what terms?

As our data have shown, the housing markets are being affected by various forces in different ways in different regions. In California, Nevada and Florida, increased foreclosures and the presumably resulting motivated prices are putting considerable pressure on markets.

In Manhattan, foreclosures are not yet a significant force and the decline in activity that has resulted is more the result of buyers and sellers disagreeing about price. I am aware of more than one instance where developers and even re-sellers are asking $2,000 a foot for condos that buyers are bidding $1,500 per foot. Our data suggest that most upscale Manhattan neighborhoods are seeing deals in the $1,200-$1,400 per foot range today but that the number of transactions is well below earlier periods.

The Zillow survey really highlights one of the key problems. Most people who do not need to sell their home (and even some developers) have yet to accept what the data seem to be saying: House prices have come down.

The housing market is really an accumulation of a very large number of housing markets and the circumstances may seem similar on the surface from one to the next, but a deeper look suggests they are very different.

The Zillow report also shows what our data have been saying for several months: Housing prices have been falling, and not all sellers think that's either real or are willing to accept the decline. The converse is that a buyer who simply pays the asking price for a home may not be very well-informed about the market.

From the height of the bubble our data indicate that prices per square foot have declined between 5% and 45% in the 25 MSA's we track.

Peter Slatin, Real Capital Analytics: Any time you are sharp and well-capitalized is a great time to do anything--this is meaningless. So is getting financing. Most buyers are not moving from rentals; what if the person buying your home can't get financing?

What is meaningful is that housing prices vary hugely, as the Radar Logic data show. Virtually all markets are in decline; the Manhattan data are skewed by some very high-end deals, but the severely slowing transaction volume tells the story. There is always value somewhere, and you can always get ripped off right next door.

The real answer is: If you see a home you want to live in and can afford it, then buy it. If you want to make an investment, be aware that value is a relative metric and will continue to fluctuate. Clearly, markets will continue to slide until a generator for the economy kicks in.

Rascoff: My point about needing to be sharp was that, yes, this is a good time for an investor to buy, but in a very different way than a few years ago. Back then, it was a good time for anyone to buy. In 2008-2009, it's only a good time for sophisticated real estate investors. The market is too turbulent for novices to succeed as real estate investors right now.

There have been serious proposals for a short-term government buy-down of mortgage rates to at least 4.5% for a 30-year fixed-rate mortgage, down from current rates of approximately 6.04%. This home-buyer incentive would apply to the purchase of all new and existing homes sold up to $1 million in price. There are a number of ways in which the government ultimately could decide to structure and fund this program, which could be addressed as part of the stimulus packages currently being discussed in Washington.

This is obviously still a long way from becoming policy, but hypothetically if this did happen then it would become a fantastic time to buy.

Slatin: Previously, it was a lucky time to buy, and many people got lucky--but many, many people are being badly hurt now because they thought they would get lucky. There are always plenty of people out there who can't wait to talk you into buying. If you are "sophisticated," then you should know already that this is a very tricky time and that it was preceded by a bubble conflated by rampant fraudulent and misguided lending and borrowing.

So, can you score a deal now? Absolutely. Will the deals get better? Absolutely. How long will you have to hold your property to make a profit--or if it's a rental, to earn a return? Longer than you'd like. But still, given all this, good deals are to be had for those willing to put in the time and risk the capital.

Feder: Peter, there are always going to be "trophy" properties that command big premiums to the rest of the market, and, as you well know, new developments tend to attract premiums as a result of location, quality, finishes, amenities and so on.

But RPX being calculated as a price-per-square-foot metric tends to eliminate the potential distortion of the outliers, and the data show that Manhattan has been pretty stable in price but significantly down in volume. What remains to be seen is whether the volume decline coupled with the economic pressure facing a large number of Manhattan buyers will cause prices to fall.

Spencer, in response to the specific question about whether this is a good time to buy, especially as an investment, the answer is probably not yet. If you look at RPX forward, the capital markets are still predicting further declines into '09, with stability appearing in '10.

Donald Trump Jr., Trump Organization: Some of the biggest mistakes made over the past few years were because individuals looked at a market as a whole: i.e., "is now a good time to buy?" The whole country's real estate market is up, ergo all real estate must be a good buy--real estate never goes down, right? People looked at it too generally and forgot about the underlying asset: the real bricks and mortar. That is the way to look at real estate.

Why did some of the markets mentioned not drop significantly? Well, they never boomed the same way the big-drop markets did, and they are stable (somewhat boring) places [where] there was no influx of speculative buyers that fueled the escalation of prices. They were conservative Midwest end-users who did not have a plan to show up with some other schmuck at the closing table to flip for a fast buck.

By the way, I disagree with putting Chicago--which was down 5.7% in the year ended August, according to Radar Logic--in the mix with the other stable markets. The market there did not drop much last quarter, true. But in the prior quarters they dropped substantially, and, frankly, the Chicago market should have served as a great bellwether for the rest of the country, because it hit a wall a solid 18 months before people even thought the [real estate] markets were in trouble.

To say prices today in most markets are substantially lower than they were one year ago also means nothing if there is no financing purchase said unit of housing. Low overnight borrowing rates and the additional rate cuts we saw this week mean nothing if lenders do not lend or do not pass these cheap loans onto end-users. Effectively, a high interest rate with a low price is similar to a low interest rate on a higher price; money is fungible. That all said, I would still rather buy cheap with higher rates because I would rather have a low basis and hope to be able to refinance sometime down the line.

Also, it totally depends on the deal. There are deals out there now. There will definitely be a lot more coming in the near future, but people have to come to terms with the fact that the "equity" that they think they have in their homes is not even close to reality. Buyers know this and are waiting; when that gap narrows deals will be made. In many instances it may take a while because people may still feel they can carry their unit and wait for a better market. For many of them it will be a long wait, and they will eventually have to stop the hemorrhage of cash flow. That is especially when you will see deals of more commercial assets, but the underlying principals will hold true for [residential] as well.

Feder: Don is right, and we've been saying for six months that one of the biggest problems in the housing market is the difficulty in getting capital. If some of these programs begin to create mortgage availability that should help buyers, and buyers will be good for the market.

That said, there is real evidence that almost all major metropolitan centers experienced some "boom" during the easy-money run and that most of those have given back the gains. If we have corrected asset prices and money becomes available, then the other big questions are supply and demand and affordability. We seem to be starting fewer new homes, and those in foreclosure (not a normal source of this much supply) are being bought. But as we enter a recession, the question of affordability will become a big issue, and we won't know for a while whether current prices will be supportable.

Remember, these are markets.

Slatin: Lower prices certainly mean something to somebody--even a well-off Forbes reader--holding the bag (or house) they bought a year ago and can't sell for that price, financing or no, without losing substantially. Nonetheless, Don is right on target in terms of how complex the real estate market is, from block to block, across the nation.

On the other hand, people looking for good value in property can also find it right now in selected [Real Estate Investment Trusts.] I've discussed a few apartment REITs in my newsletter, the Forbes/Slatin Real Estate Report. These companies are marked to market daily, and, yes, they have been beaten down hard and may still have farther to go. But unlike single-family homes, they are liquid, and the good ones won't be foreclosed on. And they have professionals managing their investment properties to find tenants.

Trump: Michael, I am glad you hit the velocity argument. That was going to be my next point, as the substantial decline in velocity is effectively the start of the decrease between the bid-ask gap--and, barring any crazy positive economic outlier, that no one fully anticipates the decline will be upon the fairly stable markets shortly. If the stimulus package works for the market as a whole I don't see how for New York City that can outweigh the incredible loss of jobs from banker types who went from making high-six- to lower-seven-figure salaries. Because so much of New York City compensation is bonus-based, many of these guys went from making $3 million to $0--not $3 million to $2.9 million--it will be hard for any stimulus to bail out the financially driven marketplaces.

Feder: Don't forget the "investors from abroad" who have had substantial hits in their portfolios recently. New York is unique in its historic appeal as an "investment" market. Data today show that has come to a standstill. Time will tell if that means prices need to fall, but at the very least the gap between the bid and the ask is much too large right now.

Trump: The other major factor that has stopped the money-from-abroad boost that has helped New York stay afloat longer than other markets was the low dollar. With the dollar rallying against the other major currencies, especially the pound and euro, the decision to park some capital in U.S. [real estate] is a lot less appealing than a year to 18 months ago where foreign buyers were effectively buying at a 40%-50% discount.

Rascoff: Totally agree with the key themes here.

Do any of you think that the proposals to have the government lower mortgage rates by subsidizing is realistic? If 30-year fixed rates came down from the current 6.17% to 4.5% that would immediately lower the borrowing costs for millions of buyers. Don hit the nail on the head when he wrote: "Low overnight borrowing rates and the additional rate cuts we saw this week mean nothing if lenders do not lend or do not pass these cheap loans on to end-users. Effectively, a high interest rate with a low price is similar to a low interest rate on a higher price; money is fungible." Bingo.

Fed rate cuts mean savings for banks, not necessarily home buyers. Having the government hard-code a lower mortgage rate is heavy-handed and is certainly contrary to my personal political persuasion. But you gotta admit: It would accelerate the housing recovery.

Feder: Somebody run the numbers. Seems to me that on $500,000 mortgage, the reduction in after-tax monthly cash is small. I believe the key is to get mortgages written.

Rascoff: For a $500K mortgage, 6.17% will cost you about $3,100 per month (P&I). At 4.5%, it's about $2,600 per month. Definitely makes a difference to a buyer on a budget.

Trump: It may be small to some Forbes readers but could be substantial to someone struggling to make payments. Part of the benefit to the realty markets would be that it stops some foreclosures from happening effectively decreasing supply, which should raise prices across the board.

That said, the delta has to come from somewhere. I assume our taxes. I feel that after Tuesday and some further legislation I will be paying socialist levels already, though that is neither here nor there. So I am not sure how to look at the possible benefits and the moral hazard that it creates for the banks.

If I am a bank, with the government as my backstop, I could raise the rates a bit over time. (I know it's not so simple, but government is largely incompetent and the lack or oversight is virtually inevitable. So the subsidy will be greedily priced in over time by the banks--yes, sorry, I am a cynic.) Buyers don't care, banks are happy, but something seems amiss. Again, I could be totally off base, as I could not read the full thesis of these proposals, so I made a lot of assumptions, which is usually a mistake.

Forbes: Let's think a bit about whether it's worth investing in housing again. Does anybody think it's possible that stocks will outperform housing in the next year or two? Imagine we're addressing a well-off Forbes reader and she's got a healthy chunk of discretionary funds. Say it's $200,000 and she's been planning to buy a condo for investment purposes. She's going to pay 50% cash, rent this condo out for two or three years and, she hopes, sell it for a profit when housing rebounds. Would any of you advise her to buy stocks instead?

Feder: Of course they could, but that doesn't mean they will on the plus side. Stocks are more liquid and more volatile. More investors putting money to work there. On the other hand, if housing prices hit a bottom and mortgages become available at reasonable cost, we could see a return to active buying. That could push prices up and the asset class could perform well. Beyond that, we'll see. ...

Rascoff: Looking at the asset classes as a whole, I believe that U.S. stocks (as represented by the S&P) will probably outperform U.S. residential real estate over the next few years. The reason is that the equity markets are forward-looking because they're so much more liquid than housing. They'll price in an economic recovery sooner than the housing market.

Even given this fact, your Forbes reader would be better off investing in equities than housing, in my opinion, because they're more liquid, and he can diversify more effectively. With a few hundred thousand dollars you could buy hundreds of stocks, spreading your risk, and hopefully outperform the overall equity market. With that same few hundred thousand dollars you can only buy one piece of real estate, which is so much riskier. On the other hand, you can get much more leverage in real estate (via a mortgage) than you can in equities (via margin), so if you want to goose your returns that argues in favor of real estate.

Net net, I'd advise your reader to stick with equities.

Trump: I hate to be the guy that can't come up with a better line than "It depends." I think the stock market will likely recover faster than real estate and a basis around 8,000 in the market is fine with me in the long term (assuming there are other blips that get it back down there in the next few weeks to create a buy).

The real difference again will depend on the deal--if you are stealing real estate it's a better buy if you found the new Microsoft circa '77 prob would go that way. On a more serious note, though, financing will come in to play a lot more here. With the real estate purchase, in theory, you can lever your returns--your reader can put her $200,000 down for an asset that is worth $1 million (though today 40% down is more likely). But that's precisely why it's a tough question as the difference between 20% and 40% leverage drastically effects your return on investment mathematically. There are many variables to be priced in.

All in all, over a longer time frame, I feel that because of the multiplier effect on leverage I am likely to make a much better return if I were to buy real estate at a low than the Dow at 8,000 or 9,000. Again it's a bit tough to decide, as I feel the markets are lower today than the real estate that I would be looking at. But real estate will still be dropping when markets have started to recover. But assuming you buy at a low on both accounts you should do a lot better with real estate, as in the stock market your upside still seems fairly limited, unless you assume the Dow will hit all time highs in the next two years.

For me I go with real estate all the time. I am not satisfied with 12% historic returns, especially when I look at my long-term portfolio these days. Besides, I play with real estate every day, so I am more comfortable knowing the asset I am buying is a good bet regardless of the world around me, and I have access to or know how to find the most favorable borrowing options, etc. ... I just do not have the same comfort level in the stock market, so I would always recommend to someone to stick with what they know.

But stock-market-earnings yields and corporate-bond yields are higher than the cap rates currently available in the apartment-rental market. Earlier this month, Baa-rated corporate bonds were yielding 7.8%, and the forward-earnings yield for the S&P 500 was 8.5%. Our friends at Green Street Advisors in Newport Beach, Calif., report that cap rates for high-grade apartment properties are below 6%. Aren't stocks and bonds a better deal?

Trump: This brings up the better question of why would anyone be buying equities today based on where some companies' debt is trading. When I see debt on fairly solid companies trading at 20 cents on the dollar I would rather go there any day. Loan to own, baby!!!! Again, timing will be key. Cap rates will go up, they will just lag market returns, so today equities be more attractive. But if you are going to intelligently put that money to use, it may be better to wait the lag between the markets doesn't make the comparison apples to apples.

Remind us to not to borrow money from you, Don.

Trump: It would be different if I was your lender, trust me. ;-)

Slatin: Isn't that what Angelo M. told his friends the senators? Equities will almost certainly recover faster than real estate--although neither asset class will come back especially quickly. But you can play both by buying REIT stocks, which have been well beaten-up and are offering great yields right now, even for strong companies like AvalonBay Communities, an apartment owner for those who would be landlords. AVB is selling for less than $100,000 per unit. After all, your condo buyer may get a good deal on a condo--but finding a renter could be a problem. Let the professionals worry about that.

Feder: Stocks, bonds and real estate are like apples and oranges. Rental buildings are, of course, cash-flow models. If demand for rentals pushes rates up, that model is going to look a lot more attractive than a heavy manufacturer's bond at 8%. So, respectfully, as Don says, it depends. Short term, financial assets are more liquid and may be better "trades." Longer term, real estate has done pretty well. It's certainly competitive with other assets. The evolution of property derivatives should add to the asset's liquidity. Whatever else, the next few years will be very interesting.

Trump: Oh boy the D word--more derivatives. Don't we learn? Isn't that what got us here in the first place? We didn't understand the ones we had, now we are making more.

Feder: Always helps to have transparency and tools. It's not fair to let a bad apple spoil the barrel. As a major developer, you should know that.

Trump: Very true, but in this case (for the creators of said derivatives and most developers) I think it's more appropriate to ask if you would eat the one apple that seemed OK in a barrel of spoiled apples. Seems to me the majority of those apples were spoiled, but that's semantics.