News people say, “If it bleeds, it leads.” This means that the front-page stories in newspapers and the lead stories on television are often scary. 

If an airplane crashes into a park and kills a family, this is bloody; this is scary; this is news! If a family goes to the park and has a great time, so what? Where’s the blood? Where’s the misery?  

For real estate, this means that news people think it is interesting when someone loses their home to a foreclosure. That’s scary; that’s news! But it isn’t interesting when someone buys a home and lives happily ever after. Where’s the blood? Where’s the misery?  

This news bias can give a very distorted picture of life. We start worrying about airplanes crashing into parks, instead of having fun at the park. We start worrying about home foreclosures, instead of thinking about how much money we would save and how much pleasure we would get from owning our own homes.

If you are thinking about buying a home, what you need to think about is how much money you will save and how much pleasure you will get from owning your own home.  

Think of buying a home like buying stocks and bonds—with one important difference. It is a lot more fun to own a home than to own a bunch of stocks.  

When buying stocks, successful investors follow four simple rules.  

Rule 1. Don’t try to time the market. It is hard to predict. In 2003, many people thought there was a housing bubble and they put off buying a home, waiting for prices to fall 50%; instead, home prices in their town went UP 50%. Now they can’t afford to buy the home they put off buying. Don’t try to time the market.  

Rule 2. Instead of trying to predict short-term price changes, think long-term. Warren Buffett says “My favorite holding period is forever.” Instead of trying to predict short-term changes in home prices, look at whether a home’s financial benefits are high or low relative to the expenses. In Houseonomics, we call the difference between the financial benefits and expenses your “home dividend.” This is what you should focus on. Is the home dividend high or low relative the price of the home?  

Rule 3. Don’t be obsessed with market averages. All real estate is local. The question is not what home prices are in other parts of the country, but whether the home dividend for the home you want to buy is high or low relative to its price. We’ve looked at real estate all over the United States, and in most places the financial benefits from home ownership are compelling. In most places, buying a home may be the best investment you will ever make.  

Rule 4. The best time to buy is when most people are pessimistic. The best time to buy is when buyers are scarce. In a buyer’s market, you can get a good price on a great home that will provide  financial benefits and personal joy year after year.  

Find your dream home and calculate your home dividend. If the numbers make sense, now may be a great time to buy a home!