Timing the market can be big risk for first-time buyers

When it comes to real estate in Los Angeles, it's a buyer’s market, but many would-be purchasers -- especially first-time buyers -- remain on the sideline, waiting for home prices to fall still further.

Well known author, Craig Guillot, with Bankrate.com, suggests they may be outsmarting themselves.

With home prices falling, surging inventories, and the threat of more foreclosures on the horizon, the housing market has been tilting strongly towards buyers in the past year. In some parts of the country, market-rate housing is falling back into affordable territories and those who were once priced out of the market are now taking a second look.

Some experts say real estate values still have a long way to fall, leaving potential first-time buyers wondering if they should hold out for lower prices. No doubt that's a good question, but waiting also carries the risk that interest rates and home prices could start rising. Experts say timing the market correctly is almost impossible and that for a traditional homeowner -- who should be taking a long-term outlook approach -- timing is irrelevant.

According to the National Association of Realtors, or NAR, the median price of a single-family home in the U.S. in the fourth quarter of 2007 was $206,200, down from a peak of $223,500 in the second quarter of 2007. Last year, home values posted the first yearly decline in 16 years and home prices fell almost 9 percent, the largest decline on the Case-Shiller home price index in at least 20 years.

The risk in waiting is that buyers could end up paying more than they need to, whether on the price of the home or the monthly payment because of the interest rates, says Bonnie Abbott, a professional real estate consultant.

Abbot cautions against generalizing the real estate market on a national level and says to look more at local factors. She says, for example, a community experiencing an influx of job opportunities may prevent the market from declining any further. She also points to the fact that many homes in all markets are still sold based on "life changes," such as births, divorces, deaths, downsizing and relocation, which means that people will continue to buy and sell homes no matter what the economy is doing.

Stuart McAfee, a Realtor with Oakhurst Properties in the San Francisco Bay area, believes prices have hit bottom in his area because investors are starting to buy properties. He says the doom and gloom portrayed in the national media has falsely convinced some people that the sky is falling in everyone's backyard. Some people point to the subprime mortgage crisis and the resulting foreclosures as a basis for further price decreases, but McAfee says the problems have been blown out of proportion.

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