Several readers have a question about home values. "There are many would-be homeowners on this blog, like me, licking their chops as housing prices dip. They are eager to buy when the market bottoms out. 'But here’s my 64 million dollar question; how does one make a good buying decision in a down market? What characteristics of stable neighborhoods should we be looking for as we seek our dream home (or dream investment) in this rather unstable time?"

One responded, "Maybe I’m overly optimistic, but I think it may be a less frightening undertaking than it first seems. Let’s suppose that things totally crash and burn; you’ll be able to see that things are still going down when it’s happening, and afterward people will be really reluctant to buy back in. So, there would be a prolonged period when everything had bottomed out and you could then take your time sorting through your options to find the right situation."

"Or let’s suppose that..we see a relatively soft landing. In that case, the period when things have bottomed out will be shorter, and it also won’t sink to the same depths, so your chances of a nice neighborhood totally going to pot are slimmer too. I’d say that if you’re a generally prudent individual then you’ll probably be in a generally good position to find yourself a nice, stable (and affordable) home with not too much to worry about."

Another reader added, "How will the less established areas fair. Especially those with high vacancy. We all know the consequence of sprawl. We must now ask, what is the consequence of super sprawl?"

One had an answer, "Here’s a simplistic answer (in that it probably will not find you the absolute bottom, but you can know that you are getting a good deal): buy when you could rent the home and withdraw 10% (or 10 year treas +3%) of the home’s value per year after all your costs are covered as if you had financed the home using 100% fixed rate mortgage (to account for your opportunity cost of downpayment money)."

This reader sees a time horizon, "Every housing run up and run down (SOcal in 1990s…Japan, etc) has happened VERY gradually. The San Diego market was at a bottom for about 3 years. Interest rates and the stock market also play into the equation. The best advice is to buy a house as a home with a loan you can stomach for 10 years…Maybe 5 years if you think we are near a bottom!!"

Another had this advice, "Pay attention to all the details the bubble pushers ignored. As soon as the cost of ownership obtains parity with renting you will be pretty safe. You may not catch the bottom, but you will be no worse off and the much touted bennefits of ownership are real. If you are disciplined enough to save enough to pay cash, go to the courthouse auctions observe and learn." "In the mid 90’s auctioned property went for between 1/2 and 2/3 of retail value (ie. 60k homes sold for 30-40k). You must be very careful and assure that the auctioning party has the sole interest in said RE. Contact the auctioning party to determine the terms."

"Don’t bid on anything till you have done your homework and talked with anyone at several auctions that will give you some time. Look at as many housed as you can and make YOURSELF the best judge of VALUE. A good agent is vital at the bottom of the market. If you become the best judge of value out of all your peers you will not hesitate on the real great buys, and believe me there will be no hurry, there will be more really great buys than you could possible purchase. You must keep your powder dry for the optimal purchases."

"Nothing sucks more than to be making a GOOD purchase (that precludes you from anothet) when a FANTASTIC purchase surfaces. Like I said above, there will be more FANTASTIC buys than you could possible entertain."