Now is supposed to be a great time to buy a home. Mortgage rates are low and prices have fallen. The combination makes dwellings relatively more affordable to buy. Plenty of homes are on the market, and inflation, presumed to be on the horizon, could boost home values over the long term.

Yet many might-be buyers remain on the sidelines due to near-term doubts about the wisdom of buying a home. Indeed, a third-quarter survey by Fannie Mae found that 33 percent of those asked said they were more likely to rent rather than buy their next residence.

The recent rise in mortgage interest rates despite the Federal Reserve's efforts to keep rates low should be "an alarming event" for anyone who wants to buy in the next few years, suggests Sean O'Toole, CEO of ForeclosureRadar.com in Discovery Bay, Calif.

"That should have them thinking about buying sooner rather than later," he says. "If rates do go up, prices will come down, so it's probably a wash, but it will still be a bitter pill if you locked in at 8 percent and your neighbor has a 3.8 percent loan."