Real Estate:  Opportunity Knocks

From commodities and construction materials to interest rates and mortgage lenders, the state of real estate is at the forefront of most business and financial debates.

Many home builders have faced troubles this year, leading to warnings and downgrades from ratings agencies. Top firms including Lennar, KB Homes, Hovnanian Enterprises, Toll Brothers and Pulte Homes have all reported anemic sales, posted disappointing earnings and given pessimistic forecasts at various points this year.

Beazer Homes announced it would delay filing its third-quarter financial report; on the news, its shares dropped 10 percent Monday. And every market observer remembers the infamous guidance offered by D.R. Horton CEO Donald Tomnitz in late March: "'07 is going to suck, all 12 months of the calendar year."

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And on Wednesday, the National Association of Home Builders/Wells Fargo Index of homebuilder sentiment, which tracks perceptions of current market conditions and home sales expectations going forward six months, fell to to 22 from 24 in July; economists surveyed had expected 23.  The NAHB said the August reading was the lowest in 16 years.

But some say opportunities still exist -- if you know where to look. CNBC's team of reporters dug into the real estate market from every angle. Here is a sampling of what they found.

South Florida: 'Vulture' Bargains

Mike Huckman reports that the tip of the Florida peninsula is being called the "ground zero" of the market downturn -- spawning "a new breed of investor, the 'vulture capitalist'."

He says that in Florida's three toniest counties, prices have plunged 7%-9% over the past year, thanks to ballooning inventory. Some 45,000 new condos are currently being built, on top of 63,000 condo conversions over the past few years. One site Huckman visited -- a $91 million, 522-unit condo conversion project -- is now in receivership.

Jack McCabe of McCabe Research and Consulting says, "Hedge funds and the investment asset groups have been circling South Florida over the past year... they've got hundreds of millions of dollars earmarked for war chests to purchase distressed properties, and they're doing it."

Maryland: Building Boom

Hampton Pearson reports from Bull Rock, the fastest-selling housing development in Maryland, boasting 2100 new units at various stages of construction. Prices for single-family homes average $400,000.

Why would the developer, Clark Turner Homes, keep building during a national downturn? Pearson notes the Havre de Grace, Maryland community has an “ace in the hole”: military consolidations, expected to bring 45,000 to 60,000 new high-paying jobs to the area.

Clark Turner, the firm’s namesake president, points to 600 units already sold, with inquiries into “many” more.

“We’re going back in and buying these lands, we think they’re great buys right now… When we see all of the new job growth planned for this area, I think the nationals [homebuilders] will be back, buying lots from me, finished lots – at a higher price than they walked away from them for,” Turner says. “We’re building up a pent-up demand of buyers.”

Seattle: Up Up And Away

Jane Wells reports that Seattle home prices are up more than 10% from a year ago -- 3.5 times better than the national average. Like New York City, Seattle has limited space to build and new rules restrict development -- even as the local economy booms, thanks to hiring sprees by Microsoft, Boeing and Starbucks.

Matthew Gardner, economist at home builder Garner Johnson, tells Wells that Pacific Northwest real estate "didn't see the huge appreciation that we saw in the other parts of the country" -- so prices still have room to rise. He adds that less than 7% of the area's mortgage loans last year were subprime.

As Wells note, nationwide there's a nine-month supply of homes for sale. The Northwest has only a five-month supply, while Seattle's is only three-months.

For those wondering how to play the Rainy City, William Crow, analyst at Raymond James, sees opportunity in shares of Essex Property, which has large rental property holdings on the West Coast, especially in the northern end.