Not having a crystal ball to see the future, we can only guess and speculate about what the future holds. There are many people proclaiming doom and more gloom. Is there a word of hope?
Yes. The Obama Administration placed a hold on foreclosures. The banks have not been adding more properties to the inventory of houses for sale. The expectation is that the moritorium will end and a new flood of REO properties will hit the market. This is one possibility. It is not the only possibility.
There is another outcome we can hope will materialize. During this moritorium, the banks are working to make home retention possible for more homeowners. Some of the options they must employ makes them out of compliance in light of present bank regulations. The hope is that the rules can be modified to enable the banks to help homeowners stay in their home. For example if a bank shows a loss on their books, it reflects negatively on them. They are therefore reluctant to do "whatever is necessary" to keep someone in their home.
At a point these issues are resolved, there should be a soft landing for the declining market. The force of the next wave may be softened to a point that the market can absorb the fresh supply.
This is the plan that is being worked out at this time.
Meanwhile in the Gateway communities we are seeing the market inventory shrink. The bidding wars for a given property have returned. All though the prices are at 1/2 price compared to the peak, they are none the less at times selling above the bank's asking price.
Investors can buy a property for 20% down payment and rent it at a positive cashflow. The transition of property from owner occupied to tenant occupies is creating a safety net for the market.
The tax incentives plus the historical low interest rates are creating a buying opportunity that probably will be coming to a sudden close when the impact of the inevitable inflation spiral begins.
Many wise people said that the continued appreciation of houses could not continue. Likewise, the continued fall of prices and interest must also reach a bottom. Remember a house is a necessity. Everyone must live somewhere.