We have definitely been seeing more activity over the last several weeks in the local Greater Boston residential market. More people are calling on signs, looking and making offers and properties that are priced right are going under agreement.

The FHA’s 30 Year Fixed Rate forecast calls for lower rates as we move into the summer which might prove to add some continued stimulus to the market. Whether the stimulus of slightly lower rates this summer overcomes the downward pressure that is increasingly-tighter-lending-standards remains to be seen. Just because a lower rate makes you want to buy a home doesn’t mean someone is going to lend you the money.

New residential permits have dropped dramatically over the last year but we still aren’t seeing a very big decrease in inventory. It will probably take some time to see this statistic mean anything since the lead time on building is some 12-24 months from when the permit is pulled.

Everyone is talking about the “subprime meltdown” and people are asking me all the time if I think this wave of default is going to creep into the next tier of borrowers. I wouldn’t speculate as to what the defult rate is going to be for better borrowers but I will offer the following for your consideration…

The vacancy rate for homes on the market right now is 2.7%. Whether that sounds like a lot or a little to you, this is a record number. There are 2.1Million vacant homes on the market right now…. consider that for a moment. There are still new projects in the works. Banks are taking back property at a record clip. When will all of this inventory be absorbed?

Developers will have to be reducing their prices or else turning their condos into rentals. Banks will look to move backed up inventory more quickly. Prices will likely dip further. This is my forecast for the next 18 months.

All that said - would I buy right now? Yes. I am putting my own home on the market within the year and I will be buying another. I will not be renting. Why? Because I am going to live in my next home for a while. Anyone who is still walking around thinking they are going to limp into a starter home or condo with nothing down and an “exotic” mortgage and then they are going to move in 1-2 years is nuts. Now is the time to shop wisely, look for value, and negotiate aggressively. Do not, however, do this if you are going to show up with only closing costs and a dream;this is not your time.