In this post I will not bore you with statistics but will tell you instead what I am seeing from the trenches.  For the last several months, the market has been in a huge state of flux.  The only thing that has been predictable about it is its unpredictability.

First, home prices in general seem to be falling considerably.  How much they have fallen depends on the price range.  Starter homes seem to not have been hurt very much, but more expensive homes have taken a beating.  There are some homes that I have noticed sold for forty percent less than they would have sold for when the market was hot.  Offers that would not have received a response earlier are now being accepted.

In general, home prices are falling because there aren’t that many buyers out there right now.  In particular I have noticed a large difference between now and several months ago – where one neighborhood I was looking at almost doubled in months of inventory.

I am not sure what the exact reasons are for this dip.  Perhaps many Microsoft workers are worried about potential layoffs and the Washington Mutual fiasco affected us.  Perhaps it was just fears about the economy or an especially slow holiday season.

With interest rates very low right now, I am seeing more buyers.  In particular more buyers are calling me right now and most of them are serious and ready to buy a house in the next few months.  With both prices and interest rates falling, many buyers are realizing that the ‘stars are aligning’ and are jumping on the opportunity.

However I think it is too early to tell whether the increase in buyers will be enough to stem the falling prices.  For that to happen we will probably need to see more optimism on Wall Street and a strong quarter from Microsoft.

If I were to make a prediction, I suspect that house prices will continue to fall throughout 2009 – though they’ll fall at a much lower pace than they have in the last few months.  Interest rates will probably remain low through the rest of January, but it is difficult to say what will happen after that.  If interest rates remain as low as they have been, then I think prices will remain relatively stable or suffer a slight decline.

Of course no one can truly predict the future and the market has proven us wrong numerous times already.  However, I just thought I would give my viewpoint in terms of what I am seeing the market doing.