At the end of the 1990s, a San Francisco Bay Area couple regretted not buying earlier. They postponed a home purchase for a year so that they could save money to make a larger down payment. In the year they waited, home prices increased so much that the additional cash they saved had no effect on their ratio of down payment to purchase price. As fate would have it, they bought when the market peaked. If they'd bought a year earlier, they would have paid less and would have earned appreciation.

They stayed in the home for about seven years, during which time they remodeled to make the house suitable for their growing family. When they outgrew the home, they sold and moved to a more affluent neighborhood with a better school system.

Even though they'd spent money improving their home, they didn't realize a significant profit when they sold. Home prices declined after they bought and were just starting to recover when they sold.

Would this couple have been better off if they'd continued renting? Not in their estimation. They enjoyed many happy years living in a home of their own. They were freed of the stress of having to find another rental at an inopportune time. They were free to modify their home at will. They also realized tax benefits and built equity by diligently paying down their mortgage. More importantly, they realized significant appreciation almost immediately on their new, more expensive home.

HOUSE HUNTING TIP: Over the long term, home prices in this country have tended to rise. But, they do fluctuate over time. It's impossible to time the market. Still, you won't realize any appreciation unless you're a property owner.

We're coming out of a period of extreme appreciation. In many areas of the country homeowners who bought two to three years ago and then sold did very well. But, this is not the norm. Your home purchase decision should not be based on the anticipation of continued appreciation at the recent rate. And, in most cases, it's not a good idea to buy for the short-term.

THE CLOSING: Even though the market has slowed and appears to be heading towards a more sensible, balanced market, you may encounter competition for well-located, well-priced listings. But, where inventories are rising, you can expect to have more selection and more opportunity to negotiate with the seller--either on the price or on concessions for property defects.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers," and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books

Copyright 2005 Dian Hymer