Betty, you’re quite right. I also should’ve mentioned that if you are experiencing a life-changing event, it’s never a bad time to buy a house that you can afford.

Looking for a home? If you have good credit, 15-20% down payment plus reserves, a stable job & you intend to stay in the house for at least 5 years then buying now makes a lot of sense. The combination of low prices and low interest rates won’t last much longer and trying to time the market never works.

If you’re looking for an investment, have realistic investment criteria, are able to put 20-30% down plus reserves and intend to hold the property 5+ years there are great deals to be had. Financing is trickier in this market so your credit has to be great and, if you’re buying a rental property, having a tenant in place prior to close will give you & your lender peace of mind.

Either way, make the decision based on your long-term goals not on what the pundits are saying.

Betty

The idea that the housing market is “stabilizing” and that housing prices will rebound, are two different ideas. A halt in the decline of average home prices will occur just as a result in the slowdown of the liquidation of bank-owned foreclosures. Owner-sold home prices could continue to decline somewhat, and the average sales price would actually increase.

As for higher valued homes, those over $500K: the jumbo loan market is terrible, due to a lack of support from the GSE programs to aid mortgage loan rates (Jumbo rates are 7% with 0 pts). Those home values will continue to decline for sometime to catch up to the declines experienced by more modest homes. But those declines will be offset by the apparent increase in low value homes as foreclosure sales abate.

One need look no further back than to the RTC crisis in 1989-91 for an example of what to expect in a home price recovery. After the S&L loan crisis, mortgage money became very tight and interest rates increased with an improving economy. Combined with a modest recession, home sales fell through the floor during this period. By 1992 home sales had bottomed. But it was almost 10 years before homes started appreciating again in a significant way. And this was during a period of relative economic strength in the economy, the internet tech boom.

So, the likely scenario is a bottom sometime this year (I don’t have too much trouble with Cramer’s June 30 call, though, you are correct, Nirav, Cramer has a lousy long term record). But a bottom may not equate to a good time to buy. The economy needs to first recover, unemployment reverse, and then we will see what happens to interest rates with deep fiscal deficits during an expanding economy. It should result in much higher interest rates which will push home prices back down and keep them there.

Stay on the sidelines when it comes to real estate.