Where I am, prices of better-than-average to excellent neighborhoods have just about recovered to their all-time peaks. The listing prices reflect this optimism, but unlike back then, in general there are no bidding wars going on these days.
Anything average or below-average is still below where it was, and the very worst stuff is still selling for nothing. Most of it isn't actually for sale anymore, it has been bought up by the banks in foreclosures in a tsunami of acquisitions.
A few words about RE: I don't find housing an interesting or worthwhile investment right now. Although rents are good where I am right now, the prices are too high to make a decent investment; for instance, I was calculating 10-year ROI of an absolute maximum of 5% on very rentable condo/apartment space, assuming a 1% appreciation over that time. Why did I use only 1%? Actually I used -1%, 0%, and 1% in my projections. Having been in the thick of this for the past year, prices have gone absolutely nowhere over the past 10 years. 5 years is my timeframe of interest, and I tend to go back 2 or 3 periods when trying to project forward. 5-yr ROI's were under 4%, many significantly lower.
Not using just historical data, either. There are still lots of ARM's waiting to re-set, and people are still buying a payment, not a house. Interest rates will begin to rise next year, and prices will again stagnate, after possibly dropping again over winter.
Housing is still a vanity purchase, by and large. Every couple I know with 2 kids "needs" to move out of their 1500 sq ft home because "it isn't big enough". Amazing that millions of Americans were successfully raised in tiny houses and apartments, not to mention people around the world.
People are still buying housing on an emotional basis. The realtors telling everybody to "buy as much house as they can afford" are full of crap, but there is a sucker born every minute, especially when there is a wife involved, and kids are on the way, or are growing.
Then there are a lot of people whose essentially ONLY wealth is "in their home". The day of reckoning always comes for these people, and they have to find a way to draw on that wealth--so they sell, or do a reverse mortgage.
Without considering financing, I began to characterize what I would be doing, buying such an appreciated property for cash: I would be trading my bank account for a residential property, after which trade the property owner would now have my bank account. This struck me as perverse--yes, needs and requirements are different at different stages of life, but why would I intentionally give away what I already have: the position that everybody else (sellers) want to be in, eventually? That's why everybody hopes for a rising market.
Screw that. Housing generally sucks as an investment, at current prices. Yes, if you finance you get a tax write-off, but not complete. Yes, you can depreciate. Yes there is your capital gains exemption IFF the property is your principal residence. But on the other side of the coin, renters are a PITA, utilities/fees/prop taxes always rise, and there are the inevitable 6 or 7% realtor's fees if you want to sell. It is an illiquid investment, with huge transactional costs. The only way it makes sense is if you can pick up a property on the cheap, or if you can find a property that you can easily add value to, through your own work. Those are the properties which, in any remotely desirable place to live, the banks have bought up.
Commercial still has some promise, and I am looking at 2 commercial properties right now--however, municipalities chip away at your margins by escalating taxes, which they increasingly frequently calculate using rents as a basis, rather than the market value of the property.
Farmland is the only RE that I am still interested in, apart from maybe 1 of the 2 commercial properties on my radar. I have no interest in housing in a crappy city, or even in a secondary company-type town that is currently doing well, but which could go to pot quickly if the major, currently successful, business, left.
"Investing" in home improvements, on a home that you already own (for better or worse) might be a good thing to do, depending on your individual situation. Make sure you focus on the kitchen and bath, if you want to get back the most you can--but know that even the move on which you recover the greatest fraction of what you put in, an attic bedroom, only gets you back 73% of what you put in. Everything else is lower, the figures are well-documented with kitchens and baths in the 60's%.
So as a financial "investment", forget about it; as a sanity/satisfaction investment, go for it, if that's what you are into. That's what I mean about "vanity purchases" and "emotional decisions".
So I'm not big at all on SFH, only so-so on commercial depending on specifics, and I still feel good about good old undeveloped arable land. All depending on specifics, of course. And, by all means, make a nice place for your wife, but don't go overboard because you won't get your money back when you sell--my advice is to go for quality over quantity. Do you Americans here know that euros take their kitchen with them when they move? I would, I have a very slick high-end euro setup.
My 2 cents.