There is an interesting article in today’s Seattle Times noting that prices nationally continue to trend downward, including data suggestive of a “double dip” in prices. Here in Seattle, prices fell 1.1% between October and November of 2010, and 4.7% year over year.
What does this mean for us? Essentially, bad news, as the “worst case scenario” may be on the horizon: Prices stabilized somewhat in 2010 because of the artificial price support generated by the homebuying tax credit; with that credit gone (it expired June 30) the market has returned to its “normal” trajectory following the bubble, and the bottom is still some ways out into the future.
If that’s the case, what are the practical implications for buyers? Clearly its a bad time to buy for an investment, unless you are guaranteed a positive cash flow, which would offset the presumed short-term depreciation of the asset. On the other hand, if you’re buying a residence, then the possibility of “catching a falling knife” (in Wall Street-speak) must be balanced against historically low interest rates, tax benefits, the need to live somewhere, etc. In other words, even under the worst case scenario, it still makes some sense to buy a residence now, particularly if you anticipate living there for some time (which should allow for some recovery of equity, since the house may depreciate further right after you buy it).