Summary
All one really needs to look at is the areas that have adjusted prices most to meet the affordability index will be the winners.
Analysis
Real Estate continues and will always be a result of the demand. Location will always be a key driver in sales of real estate. Let's not lose focus on these truths.
Where overall averages have some value to the overall economy, they are simply that. One must explore the detail in each sub market and then use the truths of real estate to determine the opportunity. As markets find this balance between demand and affordability, activity will find its level of equilibrium (price to volume). If one can find a price that is affordable and at the same time find growth and incomes of that are sustainable, this market can be managed.
Caution the shadow inventory and interest rates. Shadow inventory is not just subject to short sales and foreclosures, there are numbers of homes waiting for corrected markets. One will see this as rental unit starts decline, due to the rentals from investor units. These will come back to market once prices find equitable levels for exit, thus setting price. Rates too will affect price to maintain affordability.
New inventory will be the end result of the above. Additionally, once these occur, can the demand be supplied at the price point required and those in the new construction activities can anticipate a reasonable return.
