Since I do appraisals and real estate for a living, I'll put in my .02 cents.
Most of the comments are right on target.
In terms of a home's value, a house is appraised based on the value of similar homes that sold in a one mile radius within the past six months.
Usually 4-6 comparables are used and price adjustments are made. Some examples, (here in California, it might be different for other states) Swimming pool= 10,000 Jacuzzi=5000 Bathroom= 3000-5000, if the property is on a busy street or near a freeway an adjustment up to 35,000 can be done. Age of the building 10,000-25,000, adjustments are also made for external and functional obsolescence, e.g property being near an airport or railroad tracks.
All these numbers are not fixed, it is the result of different data, county records....
If there is an addition to the property, it is only considered by the appraiser when it is done by a permit and the city records show the addition.
Personally, I get the question of "What do you think will happen to this market" about 4 -5 times daily. And, my answer is, if I knew I would not tell anyone and make lot of money!
However, my own opinion based on this market is we might see a slight downward adjustment by the end of the year and a period of flat movement ahead. I don't think there is going to be a sharp drop.
Real Estate in Los Angeles sells for up to 500/sq.ft, for areas that were selling for 185/sq.ft 5 years ago.
Are these houses worth that much, I think not. It is the market and human psychology. When there is equilibrium, the market is flat. When sellers are in control market goes up, and when buyers are in control, market is generally on a downslope.
If you are not planning to sell your home in the next 8-10 years, it does not matter what happens to the real estate market (granted you have a good loan program locked in for at least 10 years). If you are trying to get the top dollar for your house, now is the time to sell. If you are buying, I would wait till next year.
Sorry for the long post, hope it 's of some help.
Henry