Across the nation potential homebuyers have sat on the sidelines in fear or waiting for home prices to drop more. And in many real estate markets I get that. Prices have been dropping, and jobs remain a concern for some people. Those are issues not to be ignored. However, there are several issues I take with sideline sitters.

One, prices in most markets are very sticky, meaning prices do not correct downward 30% overnight. If you are expecting a big drop, you had better plan on waiting a long time. That means 5-10 years, not one year. And that means being a renter a long time, losing out on tax breaks a long time, and being subject to the whims of your landlord, with possible multiple moves thanks to being a renter.

Two, we have already seen big drops in many markets, if you are waiting for a 30% downward price drop, and we have already seen 20% – 25%, do you really think you can be a brilliant market timer and nail the timing perfectly to get the last 5% – 10% (if its even coming)?

Third, there are some markets that are stable, and a few that are even positive! Yes, the Case-Shiller national home price index decreased between 1.1 percent and 1.2 percent in 2011. House prices have been falling in general for about 5-6 years. However, Detroit and Washington, DC posted increases in house prices in 2011. Detroit's good news is likely due to the fact that its real estate values were pummeled by 45%, and possibly have nowhere to go but up at this point (or at least stay stable). Washington DC has good news more based on the reality of the strength of its local economy, jobs market, etc. You'd have to believe the federal government is going to magically and voluntarily downsize, and dramatically, for real estate to begin to have a gloomy outlook in Washington DC. And there are numerous other positive things going on in Washington DC besides the growth of the federal government.

Real estate values are driven in part by average annual salaries, and salaries were not hyper inflated from 1999-2005 during the real estate boom like real estate prices were. Any rookie economist could have told you the real estate boom would not end well. There was no basis in reality for real estate prices to do what they did, and I said this every year through the early and mid 2000's, and was told I was a fool.

So did real estate prices have to correct? Yes. Are all real estate prices local? Yes. Do you need to analyze lots of different data, like job growth, population growth, etc? Yes. Should you buy in a market that has shown strength, or at least stability? Yes. Should you avoid buying in some markets still? Possibly. It depends on how badly you need a house. If you are a family, renting is not a good option, so maybe being a market timer and waiting longer is foolish. Maybe you should simply buy, just make sure you buy the right home for you and can stay for the longer haul if needed.

The bottom line is that there are a lot of moving parts to deciding if buying a home is right for you. In a weak market that clearly has more room to fall, you may be a genius by waiting. In a stable market or a market that has already been beaten up, it may be time to dive in. In a strong market, like Washington DC, you will be a renter for a long time, and may end up looking foolish, if you decide to wait and time the market.

Do you think real estate prices are on a straight line down? Wrong. Remember when everybody thought real estate prices were on a straight line up? Wrong! Real estate prices are up and down, and all-around. They are up in some places, down in others, and up and down in others. And of course real estate is very local, down to the state, county, community and sometimes even down to the street. You really have to dig down into the details to find out the true value of a house.

If you look at the chart in the above graphic, you will see that on average Washington DC real estate values has been mostly up in price. The operative word in that last sentence is “average”. There are some parts of the city that may be dragging down the average, so if you are interested in a strong real estate neighborhood like Capitol Hill or Dupont Circle, the numbers above may not accurately reflect the strength of the market. And if buying in a weak part of Washington DC, you may have more leverage than you think in negotiating the price.

And look at what is going on in the Los Angeles area, Los Angeles real estate values were down in March, and up in April. But that is on average. There may be neighborhoods that were up both months, and have been up for quite some time. And there may be some neighborhoods that have been down for quite some time. And there may be a particular home that you love on a certain street, that is a very cute house and well priced, and it may have sold for above asking price in a neighborhood or county with declining average real estate prices. The averages do not mean much.

San Francisco real estate prices were down slightly in March, but were up strong in April. As usual with real estate, you have to dig into the details, and look at the specific house, the lot, the finish, square footage, then the street, then the neighborhood, then the county, and then the state. And there are multiple factors to look at besides real estate prices, like job growth (or lack thereof), population growth, new construction building (or lack thereof), available land, etc. It is so difficult, in fact, to determine where real estate prices are going, and why, that is why it has become important again to buy a house as a home, and not as an investment. If you buy a house as a home, and because you love the immediate area, then you will be more protected against price swings since you can stay in the home longer to accommodate for those price fluctuations if necessary.

A house has always been a home. In the last boom market in the early 2000's (technically from 1998 – 2006) when a home became an investment, and even worse a speculative investment, we all lost sight of what a house is. It is a home. Nothing more, nothing less.