I suppose that in order to answer this we must first look at what has happened and why, and if we do so then an answer begins to appear.
Why has the market slowed and why have prices fallen?
To begin with prices have fallen bacause there are now more buyers than there are homes for sale. As of today we have 292 homes available in Pleasanton and 539 in Livermore this is up @ 15% or so from this time last year.
Sales are at @ 30 a month or so this too is down @25% from this time last year.
1/ Lenders loaned too much money to too many buyers who should never have been qualified to such a high level of purchase price.
2/ Those buyers who bought with zero down loans and whose "OPTION ARMS" (Negative amortising loans) are adjusting upwards can not make the payments, and cannot refinance either and so are headed toward foreclosure.
3/ Because of #1 and #2 several major lenders are now out of business.
4/ The Media has loved to cover this, they love a good negative story.
5/ Buyers therefore are hesitant, why buy now when prices may keep falling!
This slowdown is different than the ones we have experienced over the last 10 years eg
1997 Russian economy slowdown...remember that one? Lasted @3-4 months
These were slowdowns related to the stock market which affected buyers confidence but really did not have anything to do with California Real Estate, but this one does!
In October of 1989 the Savings and Loan scandal hit and hit hard. We had close to 600 homes for sale alone in Pleasanton which was a much smaller town then. It took 5 years for prices to come back up to the peak levels they had reached in 1989.
THIS DIP IS NOT AS SEVERE AS 1989. We have more sales. We have fewer listings available.
There are still more peole moving to California than are moving out
Statistically we can track the slowdown beginning in late spring of 2005 and if we project a 5 year term then we should creep out no later than 2009.
If I am a buyer, should I wait?
You can, but by doing so you miss out on owning a home with the potential to build equity. Even buyers who purchased at the peak in 1989 did very well in the long run. Get on the equity train, its time to buy, investors are!
If I am a seller should I wait?
What for? Assuming you sell at a lower price today, and you buy today, then all you are really doing is transferring your equity, you are not disadvantaged in any way.