Published statistics from the National Association of Realtors suggests the upper Midwest, namely Detroit, Cleveland, and Indianapolis, have seen property values drop by 3-7% during 2006.

This is a perfect example of how location is the key determinant of real estate values. While the entire nation is in somewhat of a slump relative to real estate valuations, the industrialized areas of the Midwest continue to lead the nation in property value losses. In contrast, the Pacific Northwest, which includes cities like Salem, Oregon and Spokane, Washington have seen property valuations increase nearly 20% during 2006. Again, location is key.

Despite the apparent doom and gloom of the market, real estate investors continue to flock to income producing properties as an investment vehicle. But the old adage, "let the buyer beware" is as true today as ever. Industry analysts suggest individual investors can still make their fortune in the real estate market, but they must be aware of market niches, the use of financial leverage, and the growth potential of their local markets.

Bankrate.com also warns buyers to conduct due diligence prior to making a commitment to a specific property. Due diligence implies the buyer has thoroughly researched local market values, conducted comparative property analyses, obtained professional appraisals, and considered their use of the property relevant to resale value, rental income, and maintenance or repair costs. Bankrate also suggests one of the surest routes to failure in the real estate business is entering the game with a "get-rich-quick" mentality.

Real estate is a slow business. It lacks the liquidity of the stock market and prominent data regarding national averages is generally useless to local markets. With that in mind, investors must become masters of their local market, and invest with a long-term outlook. The next year may hold a lot of promise for buyers as foreclosures and interest rate fluctuations shake up the market. However, to avoid becoming a victim of sales slumps and potentially exorbitant mortgage fees, investors are well advised to enter the fray with cash reserves sufficient to see them through a six to nine month holding period.

Real estate investing is not for the faint of heart. However, for those willing to study the market and refuse to become over extended with other people's problems (white elephants), the real estate market continues to hold enormous advantages to the investor. On a final note, remember: inspect a ton of properties, make a handful of offers, and purchase one or two that meet all of your criteria for price, financing, cash flow, appreciation potential, location, and resale value.