Until all the deadwood has been cleared from the lane speculations about what remains of the market are pointless.

As to prices rising while that clearing continues about the only way it would happen is if buyers can attract people from higher priced areas who just don't know any better than to not pay more and/or the banks open the floodgates for cheap mortgage money again.

Does **anyone** see these as a good thing?

One more time folks:
Find comps from 1999 (SDAT does well for this), apply a 3% per year COLA through 2008 and you have a FAIR starting point to start your condition and market evaluation for each specific property.(Some will end up lower)

Oh yeah: Ignore the artificial price bump of the last few months from the tax credit foolishness.

I definitely agree, MrRational, that the real test of the market is what happens when the credits expire.

Not just the tax credits, but the mortgage rate manipulation by the Fed which is slated to taper off and end Q2, 2010.

Every 1% increase in interest rates cuts affordability by about 10%.

There's only 3 ways to increase real estate prices:
1. increase real wages
2. increase financing leverage of those wages (low interest rates, tax credits that can become down payments)
3. mania

#2 is about to go to work in reverse. The question is can #'s 1 and 3 overcome it? Too much slack in the labor markets for #1 anytime soon.

Prices have already hit bottom for most pockets around here.

Conventional thinking created the assumption that prices would fall another 20% from late last Spring.

Overly simplistic models bereft of their own limitations are just that.

Using COLA adjustments simply (why not say that for the DBC or DJI?) or throwing out ambiguous blanket statements like "deadwood" are unhelpful. The economy has changed substantially since then.

Lower housing prices harm institutional investments and wealthier owners--e.g. those with money--causing collateral damage to lower net-worth individuals losing their job with only 4 months of savings eventually losing their home.

Will villagers hoping to afford a cheaper house on a meager income and little to no money in the bank have much say in the matter. Not any more.

But since I own an expensive property perhaps that's just wishful thinking much like most bearish talk comes from people who currently can't afford housing .

While I think a 4% bump would be great for me, I just don't see it happening next year. I agree with most comments, once the credit gives way and the Fed stops artificially holding down rates, demand will will go down, which will lead to lower prices, but I don't think too far down. Add 10% unemployment and other factors and it is hard to think that there will be that kind of upswing in prices by next fall.

The only positive thing I notice is that there are more pockets that are getting good values for their homes, but they are far and few between.

I think 4% is definitely possible - since Congress is very likely to extend tax credits, and mortgage rates will remain clamped down until the Nov 2010 elections. After the shenanigans end, we will begin the freefall to 1999 prices.

Prices will continue to go down. The rate of decline however will be under 10% year over year. Again, this mainly has to do with the Fed purchasing Mortgage Backed Securities. They have allocated $1.25 TRILLION and is due to expire the end of Q1 of 2010. Once the rate subsidies expire, mortgage rates will be at least 6%, if not 7% since investors do not want to buy the paper. When the tax credit expires the end of next year, you will see prices fall again as people will be forced to pay more money out of pocket. The 3.5% down payment has left many buyers with very little skin in the game. As more and more homeowners become underwater, you will see more strategic defaults which only make the problem worse. The housing bubble was over inflated by these very same programs. Instead of letting the free market correct itself, Gov't intervention is only trying to "re-inflate" a bubble that will once again burst. When rates go up and tax credits are taken out of the equation, home prices will keep on falling as Debt to Income ratios need to be under 45% based on current guidelines. Now that EVERYONE will soon have more taxes taken out of their paycheck, I predict that Fannie and Freddie will once again lower Debt to Income requirements to 41% as less disposable income is available to pay for the mortgage. As Debt to Income ratios go down, more people won't qualify for a higher priced home. This means that housing prices have to go down in the future.

One more thing to add... now that it looks like health care will become mandated for everyone, Fannie and Freddie will also add your health insurance premium to your debt to income ratio since it will be mandatory. Looks like that will take a nice chunk out of everyone's purchasing power.