Flash forward to 2010. When will they recover in the Orlando area? Depends on the market segment. The market for properties priced under $100,000 has gotten red hot and extremely competitive which is driving prices up at the low end of the market. It is almost entirely cash driven. The upper $100k's and lower $200k's are still bargain territory as there are a lot fewer cash buyers at that level. I expect we'll see prices in this band to start moving up within the next few months. But if you are talking about the over $250,000 market, I doubt we'll see a recovery this year.
Let's look back in two years and see how I did.
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I have a whole economic analysis based on raw local data of homes for sale, and homes sold, month by month since 2002. All the economic pressures are pointing to prices being pressured down, however the Real Estate market is a odd market to say the least. Tomorrow 10,000 homes can decide to come off the market and prices will stabalize, and every seller is an individual and many simply don't have to lower their prices and won't. However, all else being equal I see prices being pressured down (not necessarily going down) for at least the next year to year and a half, to rebound sometime in late 2009.
As long as you are buying a home for the long term anytime is a good time to buy. I see find amazing deals on almost a daily basis nowadays as I find more and more motivated sellers. Like how the boom in 2005 couldn't last forever, the slump and amount of great deals out there now can't last forever as well.
Since you are a home buyer, I would recommend that you also evaluate the outlook for interest rates. If a price drops slightly, but interest rates raise, your net monthly payment may be higher as result.
I don't think the market will rebound until consumers begin to perceive stability and value have returned to the market. Right now there is a mindset throught ot the country that prices will plunge by massive amounts. Once people realize that is not happening then confidence will return. But don't expect to see prices rising other then nominally for a few years as prices and income need to readjust. This is what is known as a normal market. Stability will become the name of the game...
That's the Trillion Dollar question everyone wants answered. Although there may not be a real general answer, I agree with the others about the Markets being local. Here in Phoenix, AZ we have over 45,000 listings, and no where near that amount of buyers. With so many homes for sale its obvious that we are in a Buyers Market here in the Phoenix Market. However, while the number of homes for sale in Phoenix has been on the rise, prices in Phoenix, North Scottsdale, Fountain Hills, and Paradise Valley have been rising despite the market. So Real Estate is very local, as the other person has previously mentioned. It is important to remember to look for a Local Professional REALTOR to help you address any other concerns or questions about your Market.