Lots of ifs

Wolfinbarger's experience underscores how buying today can be complicated but rewarding. You may find this a good moment to buy if:

  • Your job is secure. Don't get into a tight or unmanageable mortgage payment. Keep a savings cushion to fall back on in case the economy turns bad and you become unemployed.
  • You qualify for a mortgage. Lenders are extremely careful; be prepared to produce lots and lots of documents and to give an excruciatingly detailed accounting of the sources of your money.
  • You can stay put. You'll need to be able to stay in your new home at least five years to recoup the costs of purchasing and reselling it.
  • You're prepared for competition. Many regions are seeing a shortage of desirable homes for sale, and bidding wars are cropping up.
  • You've got time. With short sales particularly, and also with bank-owned properties, buyers must sometimes wait many months for the seller's mortgage lender to act. The lender might decline the offer or even raise the asking price.
  • The home appraisal matches your price. Banks won't lend you more than a home is worth, so you may find yourself praying that the appraiser finds the home's value equal to the price you have agreed to pay.

The problem of value

Not all real estate markets are like Rancho Cucamonga, where bargain hunters are starting to feel pressure to act in the face of rising prices. Each city and neighborhood is recovering from the bust at its own pace.

"In most parts of the country, I think prices have bottomed out, but there are exceptions," says economist Dean Baker, co-director of the Center for Economic and Policy Research.

How to tell if you're paying too much for a home? Baker recommends a rule of thumb called a price-to-rent ratio: "If the price of a house is less than 15 times what a comparable place might rent for over the course of a year, then odds are, you will do OK by buying it.

"If the ratio is more than 20-to-1, then you would probably be better off renting. Between 15 and 20, I would encourage people to be cautious, but if you find a place you like and expect to live there a long time, it probably makes sense," he says.

Some experts, though, fear that today's rising prices are mini-bubbles created by local shortages of good homes for sale. If true, these rising values may not be sustainable. Bear in mind, too, that RealtyTrac estimates at least 2 million more foreclosures will come onto the market in the next few years. That should help keep prices low.

Crazy, but worth it

Despite all the ifs, Bridges urges clients to jump into the market and start looking for good deals. But she prepares them by listing the frustrations they'll encounter:

"You will find a house you like at an amazing price. But then a half-dozen other buyers pile in, making higher and higher offers until this cheap, little short-sale house is suddenly out of your price range. Or you can't get into the game at all because investors with pockets full of cash get there first and elbow the regular homebuyers out of the way.

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"You've finally got your down payment, you're ready to buy, but the bank keeps you going for months, asking for one more document, one more crazy piece of proof that you really are a worthy human being."

But, she adds, "if you wait until it's perfect, you may not be able to take advantage of this disadvantaged market. There are people who have always dreamed of getting into certain neighborhoods. You can get into those places now at prices you can afford."