Overall, inventory is relatively low with less than two months supply on the market now at this price point.

• In this price range, in some areas we are actually seeing appreciation. It’s not uncommon to see multiple bids and often the price is actually bid up from the list price.
• We may have some challenges with the purchase appraisal.
• The well priced, active inventory is dominated by REO’s & Short Sales

Sans the distressed inventory this is exactly how we counseled buyers when the market was hot (in my market ’03 – ’06). Kind of ironic under the circumstances and one would hope that consumers and real estate professionals proceed with some caution 

The five year ARM’s originated during the boom are beginning to reset now. For many if not most homeowners a lack of equity makes refinancing impossible. Meaningful loan modifications are still pretty rare and short sales still anything but “short”. With this in mind we will undoubtedly see increased foreclosure activity and that will likely create another drop in median value. So how should we proceed?

Fist of all Buyers & Agents should talk about this. Some areas and types of properties are more vulnerable than others. For example smaller, poorly funded condo associations may really struggle if a significant number of homeowners stop paying dues.

Secondly focus on the monthly payment and long term tax benefit rather than the market value of the property. We often see monthly payments equal to or less than monthly rental value. For the moment we shouldn’t consider home equity our nest egg.

Buy conservatively. I know, there are a few ½ priced mansions out there and that can be alluring. I like to recommend that the buyer at least consider the possibility of hard financial times ahead. Contemplate job status, reserves and the length of time the buyer anticipates owning the home. I have a physician client that recently told me for the first time in his career he now has big gaps in his daily appt schedule. It seems that few people are immune from this downturn.

In short I think we all must keep our wits about us and learn from the recent past. Those that ignore history are doomed to repeat it…