What should I do? Buy, sell or hold? It's the perennial question and one that has no hard-and-fast answer. Nobody really knows what is going to happen in the real estate market. And nobody, other than you, fully understands your unique circumstances. So how do you decide?

To help, we can break the question down and explore the three options in more detail. There are good reasons to do all three of the above, depending on your situation, so let's look at each one separately.

Reasons to buy

• If you plan to stay in your new house for at least five years

Why five years? This is roughly the amount of time it takes to cover all the costs involved in the actual move. The closing costs, realtor costs, mortgage brokers' costs, moving costs, costs, costs, costs, you know the score: This stuff adds up. It is not the sort of thing you want to shell out money for every 12 months!

• If home values have fallen enough to make buying a home almost as cheap as renting

This is a no-brainer. If monthly mortgage costs are going to be the same or very similar to the cost of renting, and you are in a position where you can qualify for a mortgage, then it's time to stop sharpshooting the market and jump in. For example, in L.A., rents have gone up 25 percent in five years to more than $1,600 a month. Yes, prices may drop more, but if you plan on sticking around for long enough, they’ll go up again.

• If your credit score is good enough (above 620) to qualify for a lower-priced prime mortgage

Sometimes this can make all the difference between buying now and waiting. If you have a good credit score, every $100,000 borrowed costs about $650 a month. If not, it can cost you significantly more. If you think you’ll be able to up your credit score in the next few years, it may be worth waiting on the sidelines for a while longer.

• If you’re buying a new home with a steep builder discount (e.g., in Miami sometimes as much as 50 percent off), counting incentives like free granite floors, indoor pools, top-of-the-line kitchen appliances

A bargain is a bargain in any market, and some of the discounts being offered recently are simply irresistible. If you really want to own a home and you feel you are getting a steal of a deal, why wait? Who knows what tomorrow will bring?

How about selling then? Under what circumstances should you bail out of home ownership either altogether or temporarily?

Reasons to sell

• If you can’t make your mortgage payments and refinancing won’t help. Don’t risk ruining your credit through foreclosure.

If you are in a bad situation financially and you can only see it getting worse, there’s a lot to be said for bailing out early. Not only can you save your credit rating, you may even come out of it with a few dollars in your pocket.

• If your kids moved out and you want to downsize

You’ll be getting rid of one property in a down market and picking up another. What you “lose” on the first place, you will make up for on the asking price of the new place. Transactions like these should be decided based on your individual needs. There is no need to let the market dictate personal decisions like this.

• If you want to retire and want to move to a less expensive area.

Again, this is a personal choice and it is largely unaffected by the ups and downs of the market. If this is something you want to do, then go ahead and do it.

• If prices in your area are in free fall and you bought early enough to still come out ahead

So you bought your home for $200,000 five years ago. Eighteen months ago it was worth $270,000 and you were dancing in the streets because you were such a clever investor. Now it is worth $220,000. You lost $50,000 right? Gadzooks, it’s a disaster!

Of course not; you have made $20,000 and as every other house on the market has fallen by a similar percentage, what you can get for your $220,000 is exactly the same as what you could have gotten for your $270,000 18 months ago. In situations like these, thank your lucky stars you haven’t accrued any negative equity and go about your decision-making business as normal.

Then again, if you were hoping to cash out on your investment and use the monies earned to fund a two-year motorcycle trip around Europe, I’ll tolerate a few bitter tears of remorse.

• If prices are just starting to fall in your area and are projected to fall further (e.g., median homes in San Francisco just dropped by $38,000 in the last quarter, after rising consistently since the end of 2006)

OK, let's have one little shot at sharpshooting a market. If there were ever a situation where I might consider jumping ship, this would be it. Of course, the chances are that prices will stabilize or even go up next quarter, so it’s a risky proposition. Indulge at your own risk!

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