I am pretty fed up with the way the national media is portraying the current housing market situation. Headlines such as "Housing Market Plummets" and "Home Sale Prices Down" are not relatively true.
One must realize is that the past 5 years of real estate in this country has been very profitable and advantageous. During this time, many areas INFLATED their home pricing. Buyers were able to get easy loan terms, and many buyers who otherwise would not be eligible for a loan, took advantage of the low interest rates. Many purchasers had questionable credit, and were still able to get 100% financing.
The housing market is experiencing the same rule of economy that the stock market does. When pricing is inflated, and people play the industry hard and fast, then there HAS to be a correction period. This is the situation that created the housing bubble. And the bubble has burst.
Some places see it worse than others. But I challenge you to look and see that these areas are also the parts of the country that saw the greatest "appreciation" (even though it may have been a false and temporary one)...such as Colorado, California, Virginia, etc.
Unfortunately, in our ever moving housing market (no pun intended), one part of the country affects another. If the guy in California cannot sell his house, then it prohibits him from buying another one in South Carolina. If the family in Denver is moving to Boston, they usually need to find a buyer in Denver first. That is why the overall market is suffering somewhat.
In many places, the pricing is not greatly affected, but the actual time it takes to get the buyer is about twice as long. This is because there are certain "pockets" in the LOCAL market that is considered move-up. Since it is taking longer to get a buyer for the lower-end markets, (mortgage banking rules have tightened up tremendously. Credit scores less than 600 almost prohibit one from being able to buy.) it is causing a serious shortage of buyers in some of the more up-scale neighborhoods.
None of what I have said here offers great insight to a new truth. But I just wish to clarify that the perception of housing prices falling is relative. If they had not been driven to ridiculous heights in the first place by a wealthy supply of buyers, willful and careless real estate agents and appraisers, rampant investors wishing to make a fast buck, and lax banking rules; then we would not have to be paying the piper now. Its just a simply economic rule, "What goes up really really fast, must come to a point of correction.