In 2007, inventories of home sales reached a high of 10.6 months' supply, almost twice the 5.5 months' supply considered balanced. Inventories started easing in 2008, falling to 9.9 months in the third quarter. What you are seeing is that less homes are coming on the market because potential sellers are weary of the market, and homes that are priced right are being snatched up. Plus, you are seeing a reduction in permits for new construction. In 2009, it is expected that there will be a 8.8 months' supply based on market trends in 2008. However, delinquancies and foreclosures will continue to rise due to the rise of unemployment (Data obtained from the National Association of Realtors).

It is projected that by 2010, 47 markets will swing from negative to positive territory, which means we will see some positive improvements after next year. In 2008, the median house price was $133,630, and is expected to decrease by -3.9% in 2009, but in 2010, it is expected to improve by .3% (Fortune Magazine, 12, 2008 issue). This means that for buyers, 2009 is the time to take advantage of purcashing a new home when interest rates will hover around 5% or lower.

The National Association of Realtors (NAR) paints a much brighter picture. After two years in a row of declinging sales, the NAR projects that home sales are expected to edge up 6%. For example, NAR's affordability index jumped to 131 at the end of 2008 up from 112 in 2007. It is expected to hover around 128 in 2009. The affordability index means household earning the national median income have 131 percent of the income needed to buy a median-priced home.

The historic federal Reserve's announcement yesterday, December 15th, that it would allow a short-term interest rate to fall as low as zero means money is cheap now. Experts predict that mortgage rates will fall to 5% or lower. If there was ever a time to buy, it is now! Even a 10 percent drop in home prices is immediatly nullified by a mere 1 percentage point increase in interest rates on a 30 year mortgage. Now is the time for first time homebuyers to take advantage of the low rates. For those who fear trading up, it is still a good time to buy. Savings on a larger home purchase, will offset a loss on your current home. For example, if home prices dropped 5%, and you listed your home at $200,000 and sold it at $190,000 = $10,000 less (5% less). However, if you bought a new home listed at $400,000 for $380,000 = $20,000 savings.