Finally, It's Time to Buy a House!

Warren Buffett once said: "Be fearful when others are greedy, be greedy when others are fearful."  If you're not instinctively scared of the housing market, then you probably aren't afraid of tidal waves, global warming and other "might be's".

The fact that everyone is scared to dabble in housing makes it a close-to-perfect investment based on Mr. Buffett's principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation's big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit's housing market scored a gain, inching up by 0.4%.

It is now officially cheaper to buy in 100 metropolitan cities than it is to rent! In other words, if you can buy a home today, you can save the difference it would cost you to rent even if you stay in the home just five years. If you can buy a property and rent it, it is almost certain that the rent will cover the cost of the financing—and the property will appreciate.

Here's where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.  But if you aren't planning to move out anytime soon and have job security, what's the problem?  Even if prices fall again or don't rise significantly, you will still own your own home and eventually it will be paid off.  You get to pay less taxes and no one can tell you what you can do to your own home or ask you to leave!

While there is plenty to be afraid of when it comes to home buying,  in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.

Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor's time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it's time to be greedy.