Experienced real estate investors and savvy home buyers have always known that real estate moves in cycles. There are ups and downs in the real estate markets, just like in the stock market or any other. In the long run, home values appreciate at about 4.5% annually. But unlike most stock investors, most home buyers enjoy much greater returns due to the fact that most home purchases are highly leveraged investments. Very few people pay in cash. So if a home buyer puts a 20% down payment on a house that costs $100,000, and the house appreciates by 4.5%, then the return on the initial investment is 4.5% x $100,000 = $4,500 / $20,000 = 22.5%. The percentages are the same for any purchase price. And unlike stock purchases, home owners also enjoy the benefits of living in their investments. You can't live, eat, and sleep in a stock certificate. Buying a home will always be a great investment in the long term.

But when it comes to choosing the best time to buy or sell a home, clearly some times are better than others. Putting the numbers aside, one of the best ways to determine when to buy or sell real estate is to look at the stage of the market cycle. Intuition alone can be an excellent indicator. Here is a graph that shows the typical real estate investment cycle: