Looking at housing prices in "real" inflation adjusted terms gives a better picture of the situation.

Looking at the Case-Shiller house price indices in real (inflation adjusted) terms give us an idea of how much further house prices might fall.
. This graph shows the inflation adjusted Case-Shiller indices for San Diego, Chicago and the composite indices for 10 and 20 cities. (I'd add more cities, but the graph is too messy!)
Looking at this graph, I'd guess prices have fallen somewhat less than half way (in real terms) to the eventual bottom. Of course, more inflation means less prices need to fall in nominal terms.
Also look at the length of the housing bust in the early '90s. It took over six years from peak to trough in some cities. If this bust takes the same amount of time, prices will not bottom in some cities until 2012 (or there about). |

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