The discussion continues with renters who want to buy but are afraid because we all know someone who has lost a home to foreclosure or had to short sell theirs in the last couple of years.
Many of these are young people who would really like to buy their first home. I try to give them enough information so that they can make an intelligent decision as to whether it is right for them, but sometimes discussing economics can cause their eyes to glaze over.
I always recommend that people consult their own financial advisors (not the guy in the liquor store or fast food restaurant who can tell them horror stories, but an actual professional in law or finance), but I want them to understand that they need not be the next victim of the economy if they are careful.
I liken the housing market to surfing. An experienced and knowledgeable surfer can ride the crest of a huge wave, understanding that sooner or later, the wave will break. He anticipates and prepares for the break, so that when it does, the surfer can glade in toward the shore still on his feet and ready to go out again.
A reckless surfer may get atop a big wave, but act 
as if it will go on forever, and when the wave breaks he is not prepared and he crashes with the wave and goes under.
The housing market has never gone up steadily any more than the waves in the ocean. There are crests and breaks, up and down. Historically, however, the trend has always been up. The trick is to gauge the market and your own ability to withstand the downturns so that you remain upright on your board.
Several years ago, our housing market experienced the mother of all waves - a huge tidal wave of record proportions - and those who bought homes at that time sometimes jumped in unprepared for any downturn. They bought with no down payment, with subprime loans, 3-1 adjustable rate mortgages, and 120% loan-to-value loans that made them think they could afford more house than they actually could.
They hoped that the wave would continue to build forever and never break. Unfortunately, they either didn't receive the advice and guidance of caring real estate agents and lenders who might have warned them to expect the downturn, or they chose to ignore it.
Some were speculators who bought properties for investment, thinking to hold a house for a short time and sell at a profit. Others were home buyers who thought they could pay interest only for a couple of years and then refinance when the market went even higher so that they would never have to pay the full principal and interest payments.
Other home buyers, however, were like the experienced surfers. They knew that real estate is a wonderful long term investment, 
but that over a period of years there will be ups and there will be downs. Those who plan to live in their homes for at least 10 years will be fine, as long as they anticipate the changes in the economy. They bought with a down payment and terms that they knew they could sustain for the long term.
They didn't buy such an expensive home that the slightest problem would throw them, they maintained enough savings to sustain them through a down month or two due to a family emergency, and they didn't use their homes as ATM machines to buy new cars, boats and fancy trips - they built equity. And those buyers are nearly all still enjoying their homes, riding the wave up and down and still on their feet.
Some very good and honest people got caught up in the mess, and unfortunately some of them got hurt badly, but that does not mean that real estate is a scary investment - it just means that you have to wade into it carefully and thoughtfully, and you have to know what you can and cannot afford.
It is a trite and overused cliche to say that "what goes up must come down", but it is true nonetheless. Just keep in mind that over time, it seldom goes down as 
far or as fast as it went up, despite some deep dips in the meantime. Just hang on and it will go back up, just like waves in the ocean. The huge wave and crash of recent years was an anomaly never before seen, but there are plenty of people who rode even that one comfortably.
Don't be afraid of the water - just make sure you are ready to surf and that you plan to stay in the water for the long term. Find an experienced Realtor and a lender who will help you to understand what you can comfortably afford, and become a homeowner!
Right now with rents going up more and more, it is less expensive for many folks to buy than to rent! And remember that renters are buying real estate - they are just buying it for their landlord instead of for themselves!
**********
Susan Neal
Broker / Realtor
Century 21 Noel David Realty
Fair Oaks, California
Full time real estate services in Fair Oaks CA,
with friendly professionalism, 30+ years experience.
I work hard to give my buyer or seller a low-stress
transaction.
"Happy clients make me happy."
For all your real estate needs or questions, call me at (916)705-8951or visit my website at www.SusanNealFineProperties.com.
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