You're not just buying the house, but you are becoming a member of the neighborhood. One of the best things you can do is drive through the neighborhoods at different times of the day on weekdays and weekends to really get a feel for the area and its traffic patterns. Taking the extra time to research the neighborhood will help determine if there is too much or too little social activity for your lifestyle.

A study by Remodeling magazine found the average rate of return on value for an upgrade in a home declined from 87 percent in 2005 to 64 percent in 2009.  Taking that into consideration, many real estate experts recommend homeowners remodel instead of adding on to their home.  For example, having a large, formal living room and an everyday family room is less desirable than having one multi-use common space.  So, rather than adding on, most homeowners are better served reconfiguring the existing floor plan or capturing unused basement or attic space.

Although the report by Zillow.com claims that the percentage of American single-family homes with mortgages in negative equity rose in the fourth quarter, the report does not account for seasonal changes.  The traditional home-buying season is April through August.  Historically, this time period also is when median home prices rise.  In September, median home prices generally show a declining trend, and remain steady from November through February.   The change in the median home price noted by Zillow.com is a typical year-end seasonality adjustment in price.

Unlike the national median home price, the month-over-month changes in California’s median home price for 2009 were stronger than the long-run average.  Low interest rates and tax incentives led to a rise in the demand for housing.  As a result, housing inventory was constrained and created upward pressure on home prices.  

California’s housing market has shown signs of stabilization since early last year.  Sales of existing, single-family homes bottomed out in August 2007, and the median home price reached its trough in February 2009.   In December, California’s median home price was 25.1 percent above the low for the current cycle.

Source: Reuters.com