I think we are in the solidly in the “fear” section of the curve for most owners (with speculators and a few owner-occupied’s in the desperation phase). This is evidenced by the gov’t bail out (to preempt any panic in housing/credit markets, and subsequent fallout to the economy).

The probability that the housing market has actually bottomed is very low. With the bailout, I think the rate of decline will lessen, and a more contracted erosion of values will occur. Bubbles either pop and crash or deflate slowly. Financial markets that crash can rebound relatively quickly, if there are no structural problems (1987), or they can decline for years (2000), or crash and then decline (Great Depression), from major structural problems.

I would say that there are major structural problems with housing in the US, and that the housing market does not correct anywhere near as fast as the financial markets, plus RE is more than just an asset class for most, so a “crash” in housing could take several years to unfold. The gov’t intervention may avoid a crash and the sprialing problems from an evaporation of credt, but the slower decline & stagnation could be stretched out over 5-7 years.

From a renters perspective a crash would allow buying to occur sooner (assuming credit is available at good terms, and you don’t lose your job to a recession), with the bailout I think you are seeing a conviction from policymakers that the housing market will definitely head lower, the slope of descent is the real issue. Even if prices hit bottom today, I think you would see years and years of stagnation. Why pay for that?