Bear in mind most areas in the state had some pent-up demand. A fair number of would-be first-time buyers stayed out of the market when prices hit absurd levels, and remained out as prices plummeted.

The situation is clearly different now, as it can be quite competitive. I'm of the opinion the lower prices and tax credit not only have lured that pent-up demand into the market, but have also pulled what would be future demand into the present market. It's my belief that that first-time buyer pool will end up tapped out and the employment situation is so bleak that the 'refilling' of that buyer pool will be much slower than typical. I'm of the opinion the pool of households with enough income to handle a home purchase, who *do not already own a home*, is not large enough to compensate for the pending foreclosure and organic home sales. That would lead to more drops in prices.

That's my belief, at least. The market is completely out of whack due to government intervention and I highly doubt it can support itself once that intervention recedes. Others believe differently, however.

Right now in the Santa Maria area, there is more demand for well-priced homes then there are homes for sale. We're seeing a lot of competition for foreclosures (bank-owned real estate.) Recently, we received over 30 offers on a bank-owned property that we have listed. That kind of competition drives the prices up because some purchase offers come in over the list price (and some of these buyers are investors offering to pay all cash for the property.)

One of the best ways to determine sales trends is to ask your real estate agent for a Comparable Market Analysis for homes in the Santa Maria neighborhood where you are looking. You'll get unbiased statistics regarding sales activity for homes comparable to the ones you're looking at.

As long as the average income can support the average price of a house the prices will stay the same. If the price of a house is beyond the incomes the price must drop.

Remember, most of the easy lending is gone. FHA is now having bottom line problems. They had been giving about 1/4 of the loans up from like 5% before this madness. Once they have to be more realistic in their lending ( and foreclosures will force that) mortgages will be much harder to get. When they are harder to get fewer people will get one. Add unemployment, Have you noticed it is getting worse every month? Add job security, how many people have that now? The $8k first time buyers credit is effectively dead now. Many people depended on the loan from the $8k back for a down payment. When those who depended on the $8k bribe is gone who will replace them? How many people have the good credit score and 20% down now?

How many foreclosures have there been in that area? How many banks are lending freely there? Look up alt-a loans, It is shocking to see they could be as bad as subprime was over the next 1-3 years. If you have lots of retired people who are financially secure moving in, or government jobs being added prices may stay the same or go up. But ask a simple question, why would prices rise now? Why would they go down?

Then look on trulia or zillow.com See how many houses have sold recently. If very few have sold on both sites you will see the sales truth. If a lot have sold you will also see the truth.