The "now is the time to buy" mantra has worn pretty thin over the last few years. With all the talk of foreclosures and shadow inventory, it's a rallying cry that still rings hollow for many even though we currently have low-interest rates, tax credits, and the lowest prices many areas have seen in years.
At the same time, we've seen move-up buyers disappear from the market. Unwilling to sell because they think their house is worth more than they can currently get. And unwilling to buy because they fear prices might fall further. But the reality is their house won't rise in value while the one they want falls. And unlike the first-time buyers and investors that this market has come to rely on, move-up buyers have the least to lose if the market did fall further... as their current home would fall in value in that event anyway.
In August 2009 the Federal Reserve approved an extension to the Term Asset-Backed Securities Loan Facility (TALF), committing funds to support asset-backed securities through March 2010. In November 2009 the Federal Reserve announced they would not extend the TALF past March so we may find interest rates rising shortly. In addition, move-up buyers may also benefit from current housing tax credits that will also disappear in the months ahead.
So, while I believe short-sales and REO's will be with us for years to come, don't forget that two-thirds of homeowners in California still have equity, still have jobs, and may not be in the house of their dreams, the school district of their choice or as close to work as they'd like. There may be a short period of time, right now, where the rallying cry of "now is the time to trade" actually makes good sense.
Don't miss the window.