CR had an interesting graph comparing house prices with median household income late last year. His was focused on the entire US, I did the same thing, but focused mine on Minnesota.
As one can see, we are far from the bottom, housing prices still have quite a bit to drop before they reach a point where they are affordable and perhaps more importantly sustainable for the average Joe. Any attempts to try and prop up the market are likely to be exercises in futility, short of govt subsidizing most folks paychecks to bump up household income.
As far as timing goes, I think CR’s suggestion as to the end of 2009 or longer, with the emphasis on longer is legit. I don’t think anyone expected to see the huge number of salary cramdowns as are becoming more common place today (I expect many to stay in place for a long time, if not be made permanent). Those combined with increases in the number of folks underemployed or unemployed will shift nominal income to even lower levels, and thus housing has still further to fall than my or CR’s graph would suggest. Then add in with under employment, or unemployment, credit scores are going to head to the dumpster. Even for those who might want to buy, either A, their payment is sky high, and thus they cant afford a more expensive house, or B they don’t qualify for as high a principal, or C they don’t qualify at all. The end result will be even fewer potential buyers. This will then further push down the demand for houses.
Its not all doom and gloom though, a housing reset will likely result in much more manageable cash flow for new buyers, and with it, the potential for investment and innovation can be huge. Its just getting through things while it happens that’s the problem.