If you need to buy a home, just do it. If you are buying it strictly as an investment, you are gambling. If you are doing a little of both, you are probably OK if you understand what you are getting in to.
It's still nothing more supply and demand, but not too many people understand the variables that make those up in this particular case.
Demand is only lightly correlated with how much people 'want' to buy a house. For most goods, this is the main component. For homes, the lending environment is the most prominent factor. People don't buy homes 99% of the time-banks buy homes and people rent them from the banks until they pay off the loan in full. Just like you rent your property from the state and they will quickly remind you of that fact if you don't pay your property taxes.
Demand has been reduced drastically and this has not been 'resolved'. Everyone has heard the stories of great credit, great job, etc. being denied for a loan. This is related to the lending environment again and is also far from 'resolved'.
Regarding supply, there are a few factors, the most important being the amount of new homes put on the market and the number of used homes being put on the market. Due to various obligations, builders are still building new homes and contruction permits, although down sharply, are not where one would expect a 'bottom' to occur. Used homes are flooding the market because of mis-priced risk. A main contributor is ARM's [which have not peaked in resets which would suggest perhaps 50% of the contraction has taken place at that point]. These ARM resets which in a large % of cases result in a forclosure within 60 days also cause a drag on housing prices which in itself causes people to give up on their mortgages and the pattern repeats itself.
Does it depend on area? Almost a dumb question if there is such a thing. Of course it does.
For instance, in most parts of Texas I work in, there is still tons of new home construction and prices have fallen a modest 8-12%. Oil prices and relatively cheap property has helped support the market. However, in Austin I go through the Travis county forclosure book in the tax office about once a week. The number of forclosures is accelerating and* the percentage of properties that are not selling and end up in next month's auction are increasing.
Regardless of what you decide to do [if you have a family and need a home just buy the home and who cares], the past 5 years of house value appreciation will not be repeated again in most of our lifetimes. Many people have a blurred reality as to what to expect in the future, don't assume it'll be much if any better than matching inflation. I consider housing an expense and not an investment. You wouldn't get too many people excited about a 200,000$ investment of a mutual fund that required several thousand a year in 'ownership taxes' seperate from capital gains tax, thousands a year in 'expenses' like heat/water, couple thousand a year in 'maintenance fees' such as the lawn, homeowner's association, the list goes on.
:tongue:
