James Stewart at SmartMoney hits the nail on the head. If you’re a first-time buyer looking to purchase a primary residence and you can easily afford the down payment, ongoing mortgage, taxes, and upkeep – just do it. Don’t try to time the market, just do it. Current mortgage rates are fantastic and even if a “bubble” does burst, over the long-term home values will rise.

Now if you’re anyone else, think twice. And if you’re stretching to afford the payments on an interest-only ARM, are banking on appreciation over the next couple of years, or are considering a property in which you really don’t want to live, think three times. In Stewart’s own words:

It’s true that the real estate market isn’t like the stock market: It moves in longer cycles, and it is less prone to sudden price shifts, let alone collapses. But once a negative market psychology sets in, the decline in real estate can be long and painful, as the 1991 recession made clear for many home owners. I believe that over time, real estate returns, like those of other asset classes, will revert to their historical norm, which is a markedly lower rate of return than stocks. That means the longer the current boom keeps going, the longer, and harder, the fall.

Now before you do anything crazy, or start spouting off to you bubble-thumping friends, please read the whole article.

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