Inman

Should I buy real estate at the top of the market?

Buying a first home is a scary experience. It’s easy to imagine the worst. How will I know a good house when I see it? What if I buy a house I can’t sell? How can I make sure I’m making a good investment? What if I pay too much and home prices drop?

After years of hefty home-price appreciations, it’s natural to wonder how long the good times will last. Real estate markets are cyclical: prices go up and they go down. However, over the long term in this country, prices have tended to move higher. At the end of the 1970s, after a big run up in home prices, real estate agents had a hard time believing that prices could go any higher. The market did cool in the early 1980s. But today home prices are three to four times higher than they were then in some parts of the country.

HOUSE HUNTING TIP: To protect yourself when you buy a home, adopt a long-range horizon. Don’t buy unless you plan to hold the property for at least 5-10 years. This way you can ride out any downturns in the market and sell when the market improves. Try to avoid getting into a situation where you are forced to sell in a down market. If you have any questions about how long you’ll be staying in the area, postpone your buying plans until there’s more certainty in your life.

For the buy and hold strategy to work you need to make sure that the home you buy will suit your long-term needs. This usually means: don’t buy a home that’s too small. Many first-time buyers make the mistake of buying a tiny starter home because it’s charming and it’s in the right neighborhood. But, two bedrooms, one bath and a postage-stamp lot doesn’t leave much room for growth.

A better strategy might be to buy on the outskirts of a prime neighborhood where you can buy a 3-bedroom, 2-bath home for the approximately the same price. You might not have the most prestigious address today, but you could experience good appreciation, which will finance your trade-up move. And, you’ll be comfortable in the mean time.

One first-time buyer complained that in her price range, she could only afford to buy a 1,500-square-foot house. It’s nice to have more square feet: to a certain extent, the bigger, the better. However, a well-designed, 1,500-square-foot home can be a very comfortable place to live.

Some floor plans are better than others. Ideally, there should be good flow between the rooms. A home with a central hall that leads to many rooms usually is easier to live in than one that’s laid out like a train where you have to pass through rooms to reach other rooms. Good indoor-outdoor living makes a big difference. A deck or patio off the kitchen, family room or dining room provides additional usable space and makes the home feel larger.

Some buyers put off their home buying plans for fear that the real estate market will fall. This seemingly sane strategy can be risky if prices don’t drop. You could be kicking yourself next year when you haven’t bought and home prices are further out of reach.

THE CLOSING: On the other hand, there’s usually no need to rush to buy in a market that’s bloated with inventory, particularly if new housing developments are in the works. An over-supply of housing relative to buyer demand puts a downward pressure on home prices.

Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.

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