Tighter credit is prolonging a deep slump in home sales, but a quarterly Wall Street Journal survey of 28 major metro areas shows that the surge in inventories of unsold homes is slowing.

Home sales and prices generally should bottom out around mid-2008, says Mark Zandi, chief economist at Moody’s Economy.com, a research firm in West Chester, Pa. “The market will not revive quickly, however,” he says. “It won’t be until the turn of the decade before housing activity returns to more normal conditions.”

Home sellers need to be flexible on price and may have to spruce up their house to stand out against plenty of competition, including from builders desperate to shed inventory. Yet the picture varies greatly by region and even by neighborhood. The well-heeled can still get loans on attractive terms, and demand has held up far better for homes in desirable neighborhoods near city centers than for homes in more distant and humdrum suburbs.

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