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To buy or not to buy: that is the question.

You've seen some of the choices Westerners face when they want to buy a house. But you're still wondering if now is the time to take the plunge and buy your first home, or to sell your current house and trade up to something larger. Will prices continue to drop? Will a single-family home continue to be a lucrative investment? We turned to the experts for help in answering these questions.

The biggest news of 1993 is that a combination of slightly lower prices and very low mortgage rates has made homeownership a more realistic possibility for many families, even in California. "This is a lesson that housing prices do equilibrate," says Stephen Levy of the Center for the Continuing Study of the California Economy. "The California premium over the rest of the country has been shrinking, and it continues to shrink. Affordability is as good as it's been since the 1970s."

Bradley Inman, real estate columnist for the San Francisco Examiner, agrees. "The big change is the new range of choices open to the first-time buyer. In 1988 and '89 it was gridlock. People's only option was to gamble 40 to 50 percent of their income on a mortgage, betting that their income would rise. Now the housing gridlock has ended."

The big variable, of course, is the state of your finances and your job security. William Fulton, editor of the California Planning and Development Report, says he believes that recessionary fears are still preventing many Californians from entering the market. "California's economy is still too weak, and while prices in inland areas have fallen, coastal areas arc still too high." Fulton cautions, too, that "real estate is not an independent section of the economy. It isn't going to bring Southern California out of the recession. If the Orange and Los Angeles county economies keep dropping, real estate prices will, too."

But most experts expect Western home prices to stabilize. "We've had a slide," says Levy. "Are we about to have a really big slide? I don't see it, at least not in 90 percent of the market." Seattle economist Dick Conway says, "My guess is that Seattle prices are likely to remain flat over the next 18 months or maybe suffer just a short-term dip. Despite our economic problems, we've still got people moving in here."

The one thing virtually all observers agree on is that owning a house won't be the gold mine it was in the 1980s. "In the 1990s, appreciation in home prices will go back to what it's traditionally been, about the rate of inflation plus 1 or 2 percentage points," says John Tuccillo, chief economist for the National Association of Realtors. "People will eventually get used to it."

"For 20 years people have bought houses as an investment," says Fulton. "Now people have to buy houses because they want to live in them. Our parents' generation can retire on their houses. That won't be possible for us. If you can live with this change, then buying a house is fine."

Nobody says owning a home is going to make you rich, says Stephen Levy. "But that's not what most people want. What they want is a house."
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Title Annotation:Special Report: The Endangered Western Home; house buying
Author:Fish, Peter; Gregory, Daniel
Date:May 1, 1993
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