In yesterday's Part 1 I discussed how a government induced shift in demand coupled with a growing volume of distressed sales have been two primary culprits as to why prices have recently fallen further. Now let's look at where we may be headed…

Part 2: Prices have fallen again, but where are we headed?

A rebound in real estate prices, by nature, will be one of the last dominoes to fall in our economic recovery because it is so dependent upon a healthy job market and strong consumer confidence. Simply put, people don't want to invest in what will likely be their biggest purchase and asset when they aren't confident about how well that asset will perform. Or, they simply can't purchase a home because they don't have a job.

The good news is that the job market has been making steady gains and consumer confidence is continually growing; the consumer confidence index has now risen in six of the last seven months.

Guess what? Buyers are starting get more active in the local real estate market. Take a look at what the increased volume of real estate sales in Bellevue has done to the median selling price of homes and condos since the beginning of the year:

# of Bellevue Home and Condo Sales

Median Selling $$$ of Bellevue Homes and Condos

Bottom Line: As you can see in the graphs above, prices in my local market have trended upward with demand during the first quarter of 2011. We still have bank owned inventory to work through the market, but we are starting to see a positive effect from buyers returning to the real estate market. Ideally, a growing demand will help to counterbalance some of the negative pressures and keep us on our march back to normal. After the government tax credits shifted demand we certainly hit a lull, but we are now moving past that and sales are increasing as we get into what is traditionally a more active season for real estate. Things are starting to feel a bit more normal... for now...

- Robert E. Wasser - Seattle and Bellevue real estate statistics, market trends, blog, and news