Today I found an interesting article on the MSN Money page, suggesting that the market may pick up next year. The article, being written for stock investors, focuses mostly on whether or not it is a good time to pick up some housing-related securities, but he makes some good general points about the market.
I'm not sure if I agree with him about things picking back up in January, necessarily, but I do think that next year will see at least a stabilization of prices, and hopefully by mid-year, a slow rise in market activity. To the average consumer this will feel like more-of-same, because demand has a lot of catching up to do with the inventory we have. But if activity picks up, more sellers will be successful each month, market time will shorten up, and prices will first stabilize, then (slowly) begin to rise. There will be more competition for the best-priced homes. I don't expect we'll see a tangible "rise" in prices until at least the second half of the year, but I do think prices will hit their bottom some time in the next 6 months: possibly late this year, possibly early next. We're pretty close now, in my opinion, but with the holiday market looming, there will be some natural seasonal adjustment of prices.
Actually, in terms of "best time to buy", I think this holiday season is probably it. You have the magic combination of low prices, low demand (more choice and less competition!), the added holiday slowness, PLUS being able to take the tax advantages of home ownership off this year's taxes. Could prices conceivably drop further next year? I suppose, but I don't think they'll be enough to offset the advantages of buying this year. The only caveat I would add to that would be that it depends on what you expect the Fed to do. They dropped interest rates another quarter percent at their last meeting 2 days ago, and they dropped rates half a percent at the previous meeting. Obviously, they're taking it a bit more cautiously at this point, but the question is... how cautious? Will they cut rates further? Will it be significant enough to warrant waiting? And the honest truth is we just don't know.
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