For months I have been listening to folks in the real estate market here in Tampa talk about how great it is that mortgage rates are still at historic lows.  The problem is that people buy houses much like we buy a car.  The bottom line is "what will my payment be?"  The decider for many is not is the house worth 200K, 300k, 400k but rather can I handle the monthly payment.  And here in Florida it is also, "what will my insurance and taxes add to that monthly payment if escrowed?"  That 200k house with a $1,200 a month principal and interest payment can balloon to $1700 with taxes and insurance thrown in.  Ouch! And that is just an averaged priced home.

So prices have dropped causing average people who were not investors looking for a fast buck a lot of pain.  But there is another reality. Prices can only fall so farwithout wrecking the whole economy.  The other answer is for rates to drop.

Home prices hit a historic high realtive to income.  But again, we buy like we were buying a car...what will my payment be.  Lower rates will help.  A few years ago I bought a house and got a 30 year fixed at 4.8%, a rate I never thought I would see in my lifetime for a mortgage.  I wish I had it now!  The point is when rates finally fall under 6% it will spur more folks to buy.

This week rates fell to a 2 year low of 6.1%.  I suspect that by January we will see a slide under 6%.

The market is correcting the excesses of the past 5 years.   In my zip code values have fallen about 18% from the same time in 2006. With the side in rates, the affordability factor is even better. The long term prospects for home ownership are as good as they have always been. 

Homes are long term investments.  As the commercial goes, you don't go to an auction house and buy a Van Gogh and immediately put it back on the auction block and hope to make money.  Maybe we have all learned a lesson over the past 18 months.....Homes are Piggy banks...not ATM's