The housing market is a mirror of the overall economy. As such, it is also cyclical in nature. Prices of real estate tend to go up when the economy is doing well. This match has a certain lag of a few years in that housing prices go up a bit later than the overall economy. Conversely, when the nation’s economy takes a dive, housing prices also fall much later by perhaps a few months to a year. Buying real estate property is one of the major purchases a person can make in his lifetime. It should be done with deliberate decision-making caution as the wrong choice is very hard to undo.

Things to consider when buying real estate properties are its location (primary consideration) and secondarily, other factors such as price per square meter, topography of the land and materials used during the construction of the house. Some people also think about who their eventual neighbors will be. This “neighbor factor” is especially significant when a couple has kids. This will lead to additional factors such as location of a nearby nursery school and probably the nearest hospital too. This is specially important in case of emergencies, when baby has to be brought to a hospital in the middle of the night because of some emergency.

Since the housing market in general is cyclical in nature, it is important to time the purchase during a downturn. During this period, house prices could be significantly lower, perhaps by a good 20% which can shave a few thousand dollars from your mortgage. During downturns, banks are also more willing to lower their interest rates since there is a marked lack of qualified home borrowers. It is during this time that a potential house buyer can ask for more favorable terms than would be otherwise during a healthy economy. The negotiating leverage shifts to the house buyer with regards to both the real estate seller and the banks who will be financing the mortgage.

As a general rule, house prices tend to double in 10 years’ time, assuming that the economic boom does not have a downturn during this same time frame. As time goes by, the amortization payments become lighter due to the inflationary effects on the economy. Monthly payments stay the same in absolute dollar amounts but their real value (purchasing power) are being slowly eroded by the effects of inflation. Remember, this is also the time when house prices are going up. For some really smart homeowner, this is the time to sell the house at a profit and then buy another cheaper house using the sales proceeds. Either way, homeowners always tend to come out ahead when they make astute financial decisions with regards to their housing and financing situations. Just take into account the additional taxes that will be paid by buying, then selling, and then buy again, a new unit. Also include the agent’s commissions that will paid as out-of-pocket expenses.