Is a down market a good time to buy a new home?

The idea of investing in real estate during a down market can seem daunting to some individuals. We are all trying to keep our heads above water and maintain our status quo.

However, this is a good time to take advantage of the fact that the interest rates (30-year fixed at 5.75 percent on Sept. 30) are still low. The number of REOs (Real Estate Owned) on the market means you can get a home at a low price. Some of these homes have been trashed, but there are some that are in decent condition and will require not a lot of cost to get them into rentable condition.

"Housing is the ultimate commodity. Every home is a basket of materials like steel, wood, and copper wiring that, when combined with the cost of land and labor, becomes a store of value for every commodity that's gone into the home's construction. The current oversupply of homes on the market may be keeping prices low, but because home prices are grounded in hard costs, the long-term home price equilibrium will adjust at some point to reflect the price of production and the cost of land. Investing in commodities is a time-tested way to turn inflation's lemons into lemonade. Purchasing homes is a time tested way to buy commodities. If commodity prices continue to go up, as many experts anticipate, today's home buyers will, over the long term, see their home prices go up," said NAR economist Lawrence Yun.

Most real estate in stable areas appreciates in value. If you are truly thinking about becoming a serious real estate investor, you need to be aware real estate is a long term investment. The best way to become a real estate investor is to buy properties in areas that are desirable in which to live and rent. Not everyone wants the responsibility of owning a home, but many like the idea of living in a single family home for the convenience of the space and privacy. It would be to your advantage to get enough rent to not only cover the mortgage and taxes, but also realize a little profit.

The beauty of the entire plan is that once the family who is living in your home moves on, you still own the house. Chances are, according to Lawrence Yun, it will be worth more money than it did when you purchased the home. You will have to take care of repairs and cosmetic problems just as you would if you were residing at the property. Screening your tenants carefully and taking a security deposit is to your benefit. Most tenants do not significantly damage property. It can be said, though, that most do not take great care of it, just because the home does not belong to them. Maintaining your investment can require some work, but it is well worth the profit you eventually realize. Also, be aware there are property management companies, who, for a fee, will do all the above work for you.

Do not look at the down market as anything other than an opportunity to buy an investment for less than you would have in a seller's market. If you are looking for a solid, long term investment you can actually use, take a look at the deals in the real estate market right now. You will find that investing in real estate during a down market is a smart option for the long term investment strategist.

Linda Bush is the president of the Lodi Association of Realtors.