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Yes, the real estate market will rebound soon. Also, no it will not.

Confused? The problem with making blanket statements about the direction of the national "real estate market" is that there is no such thing. Real estate is a very localized industry, with hundreds of markets across the country. Thus, the real question for most people is "Will my local real estate market rebound soon?"

The answer to that question depends on where "local" is for you. If you live in some of the areas which saw the biggest run-ups during the housing boom, places like Florida, California, Las Vegas, or the New England coast it could be years before prices really recover. Investors and speculators bid up prices well beyond what the normal residential market would bear, particularly on condos and new development. The best advice for these markets would be to sit tight if you own, and start bargain hunting if you're going to buy. It might get worse before it gets better.

On the other hand, if you live in areas that didn't experience the huge increases of the boom, things will probably keep looking up. The Midwest and Southeast (aside from Florida) didn't really experience the housing bubble, and won't see much of the market collapse of the boom areas. The Midwest will likely continue its mild to moderate appreciation and the Southeast is actually projected to have solid appreciation in many markets where prices remain reasonable and demand continues to be strong.

Rather than asking what "the market" will do, people need to stay in touch with their own locality to make the best decisions. For people who are not currently buying or selling, the entire question is of purely academic interest. While it may be slightly depressing to think that your house was worth $25,000 more last year than it is this year, there is no "loss" unless you are actually trying to sell and owe more than the house is worth!

For those that are actively in the market to buy or sell, the reason behind the action is the most important aspect in determining what to do. If you are selling because you have to move, it is almost certainly better to sell as soon as possible, rather than make two mortgage payments and hope things improve soon. If you are buying, there will probably be deals available. Avoid the temptation to stretch for a bigger house than you were looking for just because the price might be low! Bigger, more expensive properties carry costs beyond just the mortgage payment. Buy what you were looking at anyway, and save the difference.

Regardless of your current market conditions, just remember that the real estate market is cyclical. Base your decisions on sound financial analysis and you will do just fine in up markets and in down. Unlike stocks, your house serves a functional purpose beyond being an investment, and no matter what the current appraised value there's no place like home.

Learn more about this author, David Janke.
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