Money sent your questions to leading financial experts. Here's their best advice.
When is the real estate market going to return to some sense of normalcy? --Michaelle Wisniewski, Holland, Mich.
Probably by around 2012, economists think. But before home prices can rebound, a few things will need to happen, says Nicolas Retsinas, director of Harvard's Joint Center for Housing Studies.
First, the number of homes selling below their fair value has to decline so prices can rise. Today a third of transactions are short sales or foreclosures -- and that number probably won't start to fall until the end of this year, Retsinas says. This is why IHS Global Insight thinks prices could drop another 3% to 5% in the next 12 months.
Second, the market needs to wean itself from government financing. Programs like the home-buyer tax credit, which ended earlier this year, have played a major role in the recovery. And in the three months through March, 96.5% of residential mortgages were guaranteed by Uncle Sam, up from 30% in 2006.
Also, remember that home prices generally follow employment trends. After all, the jobless aren't likely to be in the market for new homes. Similarly, workers who've seen their paychecks cut probably won't be bidding top dollar for real estate. So keep an eye on the conditions of your local job market.
The good news is, "areas that have strong employment and strong economic growth have a more robust housing market" and are beginning to normalize, says Retsinas. For example, in the greater Boston area, home prices were up 10.7% in the first quarter over a year ago. At the same time, the city's unemployment rate has fallen from a high of 9.3% in January to 8.3% in March. --Carolyn Bigda
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Last updated June 16 2010: 12:30 PM ET