There’s quite a bit of information on the internet talking about how the whole real estate market is on it’s way to a total collapse.  Well, maybe nobody says it’s a total collapse, but the implication is that if you buy you’ll lose everything, your children will be homeless and you’ll never recover anything you’ve invested.

Real estate prices move in cycles, they always have and probably always will.  Emotional sentiment towards real estate move in cycles also, just slightly behind the actual market changes.  If you are buying for a quick resale with hope of a profit, two essentials are that you are very aware of what current market prices are, and that you realize if you go over budget on rehab or past your projected timeline the market could be very different when you are ready to sell.  If you are purchasing for resale, time is important and purchase price is important, the market won’t take care of you like it’s done in the past.

Long term purchases, either for principal residence or as a rental just have to make sense not including any contribution for appreciation.  If you’ll save in income taxes by purchasing and plan on staying in the property for some period of time, then market fluctuations won’t have a lot of effect on your financial picture.  If you are in a market where properties can be purchased that provide positive cash flow then market fluctuations also shouldn’t have a huge impact on your decision.  Buy and hold is based on the amount of cash coming in, and the cash expended to keep/maintain the property, not whether you can sell the property two months after you bought it and realize a significant profit.

Real estate cycles provide opportunity.  Similar to the stock market, money is made both in rising markets and declining markets, but you have to spend the time to understand where the opportunities are as the cycle changes.