Don't be misled by slower realty market

It still makes sense to buy a home

Real Estate


Residential real estate, a shining star of the national economy that seemed unflappable over the past couple of years, has hit a speed bump.

Nationally, home price appreciation is slowing down from the rapid pace experienced by many markets over the past few years. Mortgage interest rates are higher than they were a few years ago.

Is this any time to be thinking about investing in a home? Of course it is - if you're buying it for a place to live, not as a speculative investment, and can afford to take the leap.

"Owning a home is still financially not a bad deal, as long as you have the income to support the cost of homeownership," said James P. Gaines, research economist for the Real Estate Center at Texas A&M University. Another caveat: "You better figure on living there five or six years to make any kind of profit on the thing."

At the height of the real estate boom, people would buy houses before they were built at pre-construction rates only to sell the homes for a profit a short time later, often before construction was even complete. Speculators in some markets often could sell the property for a 20 percent to 30 percent yield, he said.

A normal real estate landscape boots out those speculators, said Anthony Hsieh, president of online lender "It's just too risky to speculate now," he said.

In a growing number of local markets, buyers have more time to think about a home before they make a decision on whether to purchase it. Last year, that often wasn't a likely luxury.

"Once you as a potential buyer found a house that met your needs, you had to jump on it right away," said Frank E. Nothaft, chief economist for Freddie Mac. "One thing that we're seeing nowadays - compared to six or 12 months ago - is many markets where homes are staying on the market longer."

Home sales are expected to decline in 2006, yet the year should finish as the third-strongest on record, according to a midyear report given by Nothaft last month.

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