What’s the Latest Buzz on the Bubble?

Nationwide, we are beginning to see a slowdown in the median price of homes. The bubble has started to pop in Northern California, where Bay Area prices are down from their peak in June. But Southern California hit yet another new price peak in July. We are fortunate to live in the most desirable area in the country, according to a recent Harris Poll. However, popularity drives up housing costs. Many homeowners and speculators are now wondering how long the upturn will last, and about the future.

Real estate — unlike the dot com stocks — is a long-term investment and needs to be treated in that fashion. It is almost impossible to make predictions, or to “time the market.” From a real estate professional’s viewpoint, we can only provide suggestions for the here and now. If you are buying to realize a short-term windfall profit, you probably should not do so at this time. If you take the position that it would be a good idea to sell your house now, make a great profit, rent for awhile and then buy back in,it would also most likely be a poor choice. Here are several reasons why.

The costs involved in selling are high, the loss of the mortgage tax deduction is a great consideration, lost money in paying rent is a big factor, and buying back in will probably be at a higher interest rate. So you would not be making much — if any — progress in getting more for your money. Plus, you have inherent costs in moving out of your current residence, into the rental, and then back again when you buy your next house. Overall, it's probably a losing proposition.

Buy real estate, keep it for as long as you can, and upgrade through tax-deferred exchanges, or refinance it and buy more if you want to get rich. Real estate is and always has been the true basis of wealth on this planet for a very basic and important reason: they aren't making any more of it! Instead of guessing or predicting, get in touch with your realtor, ask questions, and together you can properly plan for the future.

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