I get asked all of the time how the market is doing, and the short answer is, pretty good. Pending Sales in October were way up year-over-year, and inventory is shrinking a bit as well. 
The reason the market should continue to recover in the short term, is because of the $8,000 tax credit being extended for first time buyers, and the $6,500 tax credit for the move-up buyers who’ve owned their home for 5+ years. We saw a last-minute peak in sales in October when the last credit was set to expire, so expect the same jump in sales in April when this next credit is set to expire. Interest rates being extremely low is also helping (under 5% as of today!).
The reason the market should continue to stay stable in the long term (next few years), is prices have come down across the board to make home ownership affordable again. If you have money to put down, it just makes more financial sense to buy then to rent.
The last two years, their was many people ready to jump back into the market, but sellers had for the most part not accepted the new market conditions, and their was a period of time where too many homes were overpriced, and so therefore buyers were not buying.
Buyers are generally only buying homes that are affordable for them, show good value, and make sense. Which is the way it should be of course. Now, sellers are also conscious of the new market condition, and in general are pricing their homes accordingly (the ones who are motivated to sell are). Investors are no longer buying property speculating that the value is going to jump up. Instead, investors are buying up deeply discounted foreclosures, and properties that cash flow. Unlike a year ago, their is an inventory of properties that fit this criteria for the average buyer, and the investor.
The next question is, when will property values start increasing again? I don’t see that happening much next year, because so many foreclosures are still coming on the market.
Once the foreclosure rate slows down, and the economy shows more signs of recovering, I then expect home values to start increasing again… but this probably will take into 2011 before we see it. Once values start to appreciate, it should be a slow appreciation. My best guess is an even 2010, then 2 to 5% value increases in 2011, 2012.
The one exception is if you have a home in Bellingham priced under $300,000 in a desirable neighborhood. The value should already be increasing from it’s low in the spring of 2009. The low supply and high demand for these type of homes makes them first to appreciate.
“Between stimulus and response there is a space. In that space lies our freedom and power to choose our response. In those choices lie our growth and our happiness.”
It was vital the Fed extended the $8,000 tax credit for first timers through this winter, and it was done last week. The extension is good through April 30th, 2009. In addition, they added a $6,500 tax credit for all homeowners who have owned for 5+ years. They also opened up the credits to higher income couples making up to $250,000 a year, or singles up to $125,000.