How to adjust to the changes

In a changing housing market, what should buyers, sellers, and homeowners who are considering refinancing do?

Borrowing

The question for many is: adjustable or fixed-rate? Which is preferable depends on several factors. How big is the spread between fixed and adjustable rates? If it's narrow, a fixed rate is the way to go, said mortgage expert Keith Gumbinger, vice president of HSH Associates, a national mortgage-information firm.

Also important: how long the homeowners intend to live there, how well they can accommodate changing payments — and their gut instincts.

"If you can't afford to lose, you can't afford to gamble," Gumbinger said.

He advises those who can afford a fixed-rate loan payment to take it. "If you can eliminate risk, why not do so?"

As for refinances, "we've been kind of cavalier in borrowing against equity, but you don't want to put yourself in a place where you've left yourself no outs in case of an emergency," he said.

That can happen when, for example, a homeowner has 20 percent equity and cashes out all but 5 percent. If home prices stall, or roll back, there may not be enough left to pay taxes and other costs if the home must be sold suddenly.

Buying

Jeff Mann, a John L. Scott agent, said "buyers and sellers are on even ground right now." That eases the potential for overpaying. But as always, real estate is highly localized.

While sales in some areas are sluggish, others remain strong. So buyers need to be very attuned to local conditions to get the best deal.

If they overpay and appreciation is modest over the next few years, they may not be able to sell at a profit. Or worse: break even. That happened to some Seattle buyers when appreciation stalled in the early 1990s.

Because of an emotional attachment to their home, most "sellers aren't as realistic as they could be" about what it's worth, Mann said.

That's a problem when the sales rate softens and inventory builds. So experts say sellers need to realize that their home must be priced competitively, must be decluttered and in immaculate shape.

Then they need a strong marketing plan. Patience is a virtue, too. The more a market cools, the longer it can take to land a sale.