As of this writing, the Snohomish County real estate trend shows that we have leveled off (at least since April '09)  Is this a sign of recovery or are we just holding up because of the seasonal real estate cylcle? Spring and Summer usually carry more activity than the Fall or Winter seasons.

My market observations, show that the lower priced homes have stopped to fall further.  The mid range and higher end priced homes are still undergoing a correction, however we are not seeing the free fall we had last year. The bottom does not seem to be dropping any further.  In fact, homes continue to sell, buyers who took advantage of the $8000.00 dollar stimulus tax credit so far were able to get some good buys.  Buyers who are waiting for prices to drop further in my oppinion may miss their window of opportunity.

Smart home buyers who are focused on finding a bargain should keep their eyes on leading indicators that usually preceed the bottom of the market, such as dropping inventories of homes for sale and number of sales pending (see report from the NW MLS).When that happens, the good deals will quickly become harder to find as they are either gobbled up or sellers realize that they have more buyers interested in their properties and either raise prices or become less willing to negotiate.  At this point in time I don't believe home prices are going to change too dramatically.  However, we are seeing multiple offers on bargain homes.

Other indicators you may want to watch include unemployment, interest rates and inflation. Employment is still an issue, here in the County. Additional job losses, if any, will certainly make it harder for people to buy homes and may deteriorate the real estate trend.

Interest rates are holding nicely.  People who qualify for a loan are in a great position to buy a house.  Let's say that interest rates are at 5%, and sellers willing to conceed to buyers requests can mean that you can buy a house and ask the seller to pay a point in your favor.  This would bring your mortgage down from 5 to 4 percent. Lets say that the loan amount is $300,000.  A 30 year mortgage, payments would be $1610 and $1432 at 5% and 4% interest rates respectively.  That's a savings of $178 dollars every month for the next 30 years ($64,080 total).  On the other hand, if interest rise by one percent from 5 to 6% your morgage payments would increase to $1799 or $189 higher.  That one percent increase may mean that you can't afford the house and would have to buy something else less expensive or smaller home. To run some scenarios on your own use this morgage calculator from bankrate.com

Inflation so far is not an issue.  However, once inflation starts to creep up, mortgage investors are going to demand higher interest rates as they would like to get higher yields from their investments.  Higher interest rates would hamper a housing recovery as it would limit buyers ability to buy homes.

So which direction are going? Only time will tell (where is my crystal ball?).  I am sure we are going to see some corrections going forward.  Keep your eyes open for the fall and winter months to see what happens to the market.