It should be a buyer's market when it comes to metro Atlanta real estate. Home resale prices in the metro area dropped nearly 8 percent in May from a year ago, according to a closely watched 20-city index released Tuesday.

But buyers aren't ready to bite — especially in the suburbs.

Take Henry County. Houses are sitting on the market for years in the once-booming county, said Rita Hutson, an associate broker at Metrobrokers/GMAC Real Estate. Just last year, the U.S. census listed Henry as the eighth-fastest-growing county in the nation.

But home prices in the county, south of Atlanta down I-75, are as much as 40 percent lower than three years ago, driven down by foreclosures, Hutson said.

One family purchased a home in McDonough three years ago for $525,000, she said. Now Hutson can't sell the foreclosed property for $399,000 — 25 percent less.

Realtors say it's better inside the perimeter, where prices have been more stable.

Zerina Serulle, an agent at Grant Park-based Adams Realtors, said she hasn't seen price drops anywhere near the reported 8 percent. But some people have been more apprehensive about purchasing their first home, she said, which means it takes longer for current homeowners to trade up into larger and more expensive houses.

"I don't know what they're waiting on, really," she said.

Maureen Maitland, vice president of index services at the research firm Standard & Poor's, which releases the 20-city Case-Shiller housing index, said market problems are foiling potential homeowners, despite favorable prices:

Some sellers have chosen to hold onto their property until prices rise again. Buyers are anxious about entering the market. Those willing to commit are having trouble getting favorable mortgages from lenders that have grown wary as the subprime mortgage meltdown continues to send ripples through the financial industry.

The decline in metro Atlanta home prices was only about half of the 15.8 percent drop nationally, the steepest ever according to the Case-Shiller index, which tracks resales of detached housing.

Since the index's peak in July 2006, overall home values have dropped 18.4 percent in the 20 cities it covers.

The National Association of Realtors reported sales of existing single-family homes in the South dropped 18.3 percent in June from the previous year.

Jed Smith, the association's managing director of quantitative research, said the market isn't yet ready for a turnaround.

"At this moment, the level of buying has not increased to the level one would expect it," he said. "When you get into a down situation, it tends to feed on itself for awhile."

The Case-Shiller index showed May home resale prices at record lows in nine metropolitan cities: Las Vegas, Miami, Phoenix, Los Angeles, San Diego, San Francisco, Detroit, Minneapolis, and Tampa, Fla.

The reasons for the decline differ per region, Maitland said. In the Midwest, a regional recession tied to downturns in the automotive and manufacturing industries has hurt job growth, decreasing home-buying. In areas like Miami and Tampa, which she said experienced inflated price gains of at least 30 percent from 2004 to 2006, the housing crunch has been particularly painful.

Not a single city in the index saw price gains since last May, and there has not been an overall home price increase at any point since August 2006.

However, seven metro areas — including Atlanta — saw home values edge up slightly from April to May. The average home price in Atlanta increased .64 percent to $124,410, the first gain since July 2007.

Maitland warned against seeing the monthly price increases as a turnaround in the market. Seasonal changes — for example, families looking to get situated before the school year starts — can cause small price spikes, she said, but may not result in long-term growth.

Hutson, the Henry County real estate agent, sees some opportunity in the down market. She and her husband recently purchased two homes for $40,000 and $35,000 each, about 35 percent of their value as calculated by the tax assessor's office. They're renting out the homes, planning to sell them for a profit down the road.