Whether you call it a soft landing or call it a bubble bursting, there is now little doubt that the residential real estate market is cooling off. Everyone agrees that we are in a buyer's market, and that raises an interesting question. Given the weakened state of local housing prices, does it make sense to buy now, or is it smarter to rent for a while and see what happens?

While one can never know for sure what will happen, there are obvious pros and cons to both courses of action:

Data from the National Association of Realtors suggest that prices of resale homes are actually falling on a nationwide basis, although there is no information yet available on local resales. In addition, the national supply of unsold new homes is now well above six months, typically regarded as a tipping point between supply and demand.

With prices presumably declining and supply apparently exceeding demand, what are the relative advantages of renting versus buying now?

Here are some thoughts:

Renting, especially on a short-term basis, simply preserves your right to make a decision later. All the usual advantages of renting apply: you have preserved complete housing flexibility; it requires no down payment; it is typically cheaper on a monthly basis; and no portion of your budget or energy is wasted on maintenance or repairs.

In addition, it is possible that renting today allows you to purchase at a future date when prices may, in fact, be lower than they are today.

Unfortunately, there is a danger to taking the wait and see approach.

No one can know how long prices will continue to decline, or how much of an impact that trend will have in this particular market. Additionally, trying to time the market is always difficult, and no one is suggesting that the current conditions will last indefinitely.

So while renting is certainly a valid option for those who need more time to make a decision, it is more of a delaying tactic than an affirmative course of action. And there is a real possibility that a rise in interest rates between now and later may offset any price decline experienced during this
current market. In contrast, there is the option of buying a home in the current market.

Brokers in the metro Atlanta area are telling their sellers that the days of multiple competing offers are over. Instead, those who hope to attract purchasers are offering to pay some or all of their buyer's closing expenses, and agents are advising sellers to lower their expectations for a sales price to levels lower than those seen during the recent boom days.

The reality is that there are more sellers than buyers in today's market, and that puts the advantage in the buyer's court. If a seller is unwilling or unable to offer an attractive price and terms, buyers will simply find what they seek at another house.

As a result, it's hard for me to recommend that any serious buyer spend too much time siting on the real estate fence.

The real icing on the buyer's cake is today's rates on long term home loans. In the past couple of months, we have seen a decline in 30 year fixed-rate mortgages to below six percent. Many economists expect rates to move higher in the months ahead, although higher rates could exacerbate declines in future asking prices.

Unlike past periods of home price retraction, we are not in a recession, we are not losing jobs, and the economy is not in trouble. In fact, we are adding jobs at a fairly strong rate, and the economy is fundamentally strong. These facts make predicting the future of the housing market particularly difficult.

Even so, I believe the following facts to be compelling:

* Buyers who take time to shop and compare during this winter season are quite likely to find themselves an excellent price on a home that meets their needs.

* Sellers are going to be doubly motivated to cooperate with buyers between now and next spring, when some economists see the possibility for excess inventory to be absorbed.

* Interest rates are particularly attractive now, and a low fixed rate
mortgage rewards the buyer not only today, but month after month as the cost of replacing that loan goes up in the future.

Another fact to take into account is that price declines tend to be steepest in markets which have experienced the greatest year over year appreciation
during the recent five year boom.

You should be thinking of Las Vegas, where resale home prices shot up 54% during calendar year 2004, then experienced a smaller, but measurable, gain the following year.

The metro Atlanta area, reassuringly, has experienced a much more measured and moderated series of price gains during the past five years, seeing increases in the range of five to seven percent annually. As a result, Atlanta's median prices are well below the national average.

So what's the bottom line for today's prospective home buyer?

While you certainly have my permission to sit on the fence a little while longer, I wouldn't plan on waiting too long.

The winter months have traditionally been a period of reduced sales activity in the Atlanta housing market, typically followed by a rebound in the spring when the dogwood trees blossom.

I don't know for sure that such a rebound will happen in Atlanta. It may not. But at some point this housing slowdown will be replaced with a more normal relationship between buyers and sellers. And when you read about that, it will already be too late.

Ten years from today, I believe we will be talking about how low prices were back in 2006, wishing we had bought more real estate instead of less. And when that day comes, if you are still sitting on the fence, it will have become quite uncomfortable.