Raging housing markets across the country are putting increasing pressure on the nation's homebuyers, and their real estate agents, to make smart purchasing decisions in a nerve wracking environment where almost everyone knows prices won't go up forever, but no one knows when the bubble will break.

The challenge is to not be the last person to pay full price -- and even above full price -- before the market turns.

In Southern California and on the Atlantic Coast, and in more and more pockets in the South and Midwest, homes are going on the market and being swarmed by buyers.

In the Washington, D.C., area some homes are getting as many as 10 offers as soon as they hit the market, triggering bidding wars between buyers.

At the beginning of the year, the Mortgage Bankers Association, whose economists track housing statistics, projected that housing sales would be down by 8 percent in 1999 after successive record years in 97 and 98. In the past several days, however, the MBA has revised its numbers and now believes sales could be up by as much as 2 percent over last year's record -- a suggestion that in excess of 5.2 million homes could be sold this year.

Sheila Hensley of Executive Relocation Services in Memphis said the market is ripe for a turn but nobody knows when that turn will come.

"Real estate is a cyclical business, it always has been," she said. "This market will turn, and when it does there are going to be a lot of buyers who are upside down on their mortgages" -- owing more on their homes than what their houses could be sold for in a declining market.

Brian Carey of the Mortgage Bankers concedes overvalued homes could be a problem in some areas, but he also said that in some regions what appears to be a "raging market" is actually a process of catching up after years of flat growth.

"California is considered a hot market right now," he said. "But for years (in the early 90s) California home values were depressed while the rest of the country was growing steadily. I think you could say that in some ways California (in recent years) has just been catching up."

He said the same could be said for Washington, D.C. "Values have been fairly flat. What you're seeing now is a process of getting even with inflation."

Nevertheless, Hensley said it's important for homebuyers and their agents to keep market volatility in mind as they prepare to enter the fray.

"It's extremely important now (for buyers) to have a buyer's agent," Hensley said. "(Agents) need to know and explain to consumers what the list price to sales price ratio is, and how many days homes are staying on the market.

"If you give the consumer all the information, they know when a market is overheated and they know when a house is so overpriced that they'd have a hard time getting their money back" when it comes time to sell.

"I've heard agents tell buyers, especially transferee buyers, that, "Here is the rate of appreciation over the last three years. You can expect the same thing."

"That's a dangerous thing to tell a buyer. There isn't a broker anywhere who make that kind of guarantee."

Hensley said buyer agents do their clients a favor if they make sure the buyer has a loan commitment before beginning the buying process.

"We've seen smart buyers back out of bidding wars when the price got to high, but then a little while later the seller will come back and say they like my buyer's offer better -- even if it's lower.

"A lot times these people who are bidding up properties aren't able to qualify for loans," Hensley said. "And sellers realize they are better off taking an offer that may be a little lower if they are sure the deal can close in two weeks."

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Published: May 24, 1999

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