Should I Buy Real Estate in this Market?

Finally home prices are settling down and the overheated housing market is cooling. Last few years selling house has been easy, put an ad in the newspaper or conduct an open house and you will get multiple offers in weeks.
If you are in a hot market and/or you have priced your house correctly, buyers may get into a bidding war and the seller may get more than the asking price. Last summer my friend bid for a house in Middlesex County, NJ and there were 15 people in the queue at 9am before the first open house. Buyer got 8 offers in the very first week and all the buyers or buyer’s agents were asked to give a presentation for 5 minutes explaining why the house should be sold to them and to give their best offer. The house was sold 15K more than the asking price. Now market is cooling down, builders are nervous and cutting their projection and wooing buyers with incentive and upgrades. The Commerce Department, for example, said sales of new homes in September fell shy of expectations. There is a good article on USA Today by Adam Shell - Overheated housing market is cooling.
Last week luxury home builder, Toll Brothers announced that it will build fewer homes in 2006 as it faces softening demand in some markets. Toll's forecast may be another signal that the U.S. housing boom that has raged for the past three years and buoyed the national economy may be coming to an end. Interest rates on home loans, which have fueled the housing boom, have risen to their highest levels in 16 months.
To protect yourself when you buy a home, adopt a long term strategy. Don't buy unless you plan to hold the property for at least 5-10 years. This way you can ride out any downturns in the market and sell when the market improves. Be careful while opting for interest only load, avoid getting into a situation where you are forced to sell in a down market. Make sure the home you are buying will satisfy your long-term need e.g.: don’t buy a house that is too small. Many people I know said they are interested in real estate because they saw someone else make money from the rapid appreciation of the market over the last few years. But, buying real estate solely for short-term appreciation is often a big gamble!