When the housing market slows down, buyers often wait on the sidelines for a clear sign that the market has recovered. The only problem with this strategy is that you can only know for sure that a market has turned through hindsight. In other words, you can't time the market.
A slow market is perceived as an opportunity by some buyers, as it takes longer for listings to sell. The inventory of unsold listings tends to grow, giving buyers more choice. In a high-inventory market, there are usually fewer multiple offers, so buyers can cut a better deal.
HOUSE HUNTING TIP: The least expensive home in an area may not be the best investment. Unless you are a contractor with experience fixing up properties, you should hire the best inspectors you can find to look carefully at the condition of a property before you buy.
Many home buyers, particular first-timers, don't give enough attention to the cost of maintaining a home. Maintenance is a necessary part of home ownership. It can be expensive, particularly if you hire others to do the work.
Some homes require more maintenance than others. A good inspector should be able to give you a good idea of how much work a home needs now and how much it will need on an ongoing basis.
Inexperienced home buyers should resist buying a fixer-upper just because it's offered at a cheap price for the neighborhood. It's difficult to get a grasp on renovation costs during the inspection contingency period, particularly if it's a big job.
Remodeling projects can run over budget because of unanticipated problems like faulty electrical or plumbing, or an old furnace that goes bad. Or the city inspector could require that you do additional work to correct non-code-complying improvements done by previous owners.
A risk of buying in a slow market is that the value of what you buy might drop before it rises. Or, prices could stay flat for some time, which means you won't build equity unless you pay down principal on your mortgage. If you should have to move during a time when prices are soft, you might not be able to sell for the amount you paid. To decrease this risk factor, don't buy for the short term.
THE CLOSING: A benefit of buying in a soft market is that you have the opportunity to buy at a reasonable price. But, it makes no sense if you put yourself at financial risk.
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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