There simply aren't enough positive catalysts to sustain the current median home prices in Wenatchee. Home values are just now starting to rapidly decline in counties like Pierce, King, Snohomish, etc... Wenatchee will not be immune.

Pictures are worth a thousand words and the average sales price home chart (1994-2008) from Pacific Appraisal says it all.

http://i39.tinypic.com/aylt3k.jpg

You can see what normalcy really is from 1994-2003... then the average home price goes from $155k to $260k+ in less than 3-years! That is not "normal" appreciation. The majority of those gains were artificial due to the lack of loan and credit restrictions.

With the Wenatchee median household income at less than $40K a year, that would only qualify for a home in the $160k range (on the aggressive side)

Also, the layoffs will continue and unemployment numbers will increase further suppressing home values.

Wenatchee area was one of the last cities in the west to see home values spike and we will be the last to see them decline.

If Wenatchee was a self contained bubble that would be true.
The median household income at less than $40K a year reflects those working here but not those retiring here. or those with jobs that let them work from any city they choose.
It also does not take into consideration the undervaluation relative to the state average appreciation in the late 90's and early 2000.
Try and think of it less as an increase from correct valuation, but as a making up for undervaluation AND partly an increase too.
Contrary to the west side where they just cut deeper into the forest to make a new development, Wenatchee DOES NOT have an abundant land area easily accessible that fits in with the valley's traffic patterns and infrastructure.

If there were Grocery stores and gas stations and shopping from Fancher heights to Batterman grade then we would be able to expand normally. But it takes 20-25 minutes to get from fancher to central miller street in Wenatchee.

You might as well live in Quincy. Land prices relative to home valuation will keep home prices fairly stable.

The larger effect of number of units sold will be the decline in reselling that realtors contributed to.
Many realtors bought lots on speculation, made a few payments and resold them for 10-20 thousand more. (and thats a conservative number.) I know of cases where 30k-40k happened more than a few times.
Since these sales will be to actual home owners in the future, actual units sold will go down since there will not be a realtor in the middle.
This happened many times at Sunserra. People would buy a condo/house with a few thousand down pre-construction and by the time they were finished and ready for occupancy the person had listed the condo/house for sale at 25k over the sales price and in some cases the deal was concluded as a 3 way closing where the speculator never even took possession of the property.

Prices will only fall to the extent that people over price them to start with and to the extent that some people will actually need to sell the houses they bought thinking they would increase dramatically in price and they could flip them in 2 years and pocket the income tax free.
Those in that situation bought as much house as they could afford to leverage their return.
They will grow tired of living austere lives with no chance of rapid appreciation and buy what they should have bought to begin with.

While there has been an influx of retirees to the Wenatchee Valley, the far majority are still working class (and VERY small percentage telecommute at this point -- certainly not enough to have much of an impact on home prices) Plus retirement funds are down more than $2 TRILLION dollars over the last 1.5 yrs. Less money to help prop up these valuations.

Wenatchee like most of the Puget Sound is geographically challenging to build on. Definitely a factor but not enough to justify the current land values. Real estate experts had been say the same thing about Seattle-Tacoma-Bellevue real estate up till last year. That "Seattle would weather the real estate downturn and prices would remain stable" -- Well, they are now down nearly 15% and still declining.

Local real estate experts also said Seattle would not see declines because of the strong employers of the region -- Microsoft, Starbucks, Boeing, etc... well, they too are now laying off people. All 3 have recently announced major layoffs which will continue to negatively affect real estate values.

The banking meltdown has just started to have a major impact on companies nationwide and Wenatchee will not be immune.

I think the Wenatchee average sales price figure could very well drop to the $200k mark.