This article from Jan 1 San Francisco Chronicle nicely sums up the 2005 real estate market, but doesn't really venture to predict what 2006 will look like.
Over the last quarter of 2005, there was an obvious shift in Buyer attitude. Fewer houses received multiple offers, and it was clear that with the slow increase in interest rates and the mad race for housing over the past few years, buyers stopped jumping to own just anything, but were truly searching for value. Sellers, on the other hand, were slow to accept and acquiesce to the cooling of the market, which led to some properties remaining on the market for a record number of days.
In 2006 we can continue to see Buyers holding back as inventory remains stagnant. Once the current inventory of properties begins to wane and the Spring housing market begins renewed, activity will most likely become more robust.
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Amy Blakeley, Realtor