Are Home Sales
Ready To Nose-Dive?

Question: We're about to buy an expensive lot and sign a contract to have a new house built on the lot for us to live in. We have lived in our current large home on a large lot in a nice area of Nashville, Tenn., for over 37 years. We hope to sell our current home in late summer 2000 to pay a large part of the cost of the new home.

I am concerned that while the new home is under construction, residential real-estate sales and prices may suffer a substantial setback, leaving us with a much more costly new home than we currently expect.

Do you see a sharp reduction in the sales and prices in this interim? Would you recommend moving into rental property now, selling as soon as possible and moving into the new house when it is finished?

Answer: While no one has a crystal ball, most of the forces at work to support residential real estate seem stronger than ever. These include a healthy economy, housing shortages as the population expands and the threat of inflation down the road.

While it's important to remember that like anything else, real estate has its up and down cycles, unlike the stock market its prices have not recently skyrocketed to unsupportable levels. Indeed, many parts of the country are just now fully recovering from the real-estate recession of the last decade, with prices in some areas still not as high as they were back in 1990. While higher interest rates will slow the real-estate market, it's unlikely they will stop it.

Further, now is not the best time of the year to sell a home, the late spring traditionally being far better. You may find that you'll sell your existing home faster and for more money by waiting.

On the other hand, as I said, no one can predict the future. If you're worried, you may decide to sell now while the market is healthy and rent until your new home is ready. Of course, that means you might lose out on additional profits and have the inconvenience of moving twice.

Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips & Traps When Buying a Condo, Co-op or Townhouse," (McGraw-Hill, 1999).

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C.D., Nashville, Tenn.

Email your comments to rjeditor@dowjones.com.