The question on everyones mind the last few years is "are we in a real estate bubble?" In the Northern Virginia area, we have seen housing prices appreciate upwards of 100%. Prices have risen to the point where many people are being priced out of the market. What could this potentially mean?

1. There will not be as many participants in the market to buy homes which will lead to a drop in prices.
2. Homeowners who have sat and watched their houses appreciate will notice we are at the high point in the market and want to sell.
3. The increase of sellers, and decrease of buyers will create a discrepency. In the stock market called a bid/ask spread, meaning the difference between someone is willing to pay for the security and what someone is willing to take.
4. The decrease in demand and increase of supply will cause prices to drop. (simple laws of economics)
5. The dropping prices may cause panic among the sellers who want to get out before prices drop more.
6. Buyers notice the dropping prices and would rather wait and watch prices drop before buying. This way they will not end up buying and immediately have negative equity, meaning that they could not sell the house for what they just paid for it.
7. Prices will fall to a level that buyers are willing to pay, and sellers are willing to accept.

Then only problem in the Northern Virginia market now, is that homeowners have seen the tremendous growth in prices over the last few years, and they expect that it will continue to grow at rates of 20%-30% per year, which is not economically sustainable. So sellers have unreasonable expectations of what their homes are actually worth.

So, will the market decline or keep increasing???? time will tell.