It’s not so much that we will see prices drop, but increases will normalize.

Instead of the heyday of 25 and 30 percent increases in value, we’ll see a more modest 5 to 10 percent or so as the market levels off.  We’ve all seen the real estate market take a beating before, so what is the major difference this time around?  It’s interest rates - pure and simple - they’re still low, historically low.  I have no doubt that we will see foreclosures increase over the next few years, basically because Adjustable Rate Mortgages will come due and homeowners will be unable to keep up with their payments, so there will be deals to be had.

However, it’s also important to remember that the real esate market is different for different price ranges.  As buyer’s find themselves able to borrow less than they once thought possible, there will be increased competition under $1 million, (once we level out), but the market over $3 million will remain unaffected, as often buyers in that price range are able to weather the storm financially.  Houses most at risk may be those between $1 to $3 million.

Remember, the bubble only exists if you are forced to sell your home in this current market and have not been in it long enough to build equity.   Otherwise…just sit tight and ride it out or keep your eyes open for a good deal!