IMHO, option-ARM loans schedule is one of the misguided index to predict bottom of the housing market. The most important reason is that people are “walking from their mortgage as I write this”. When these people finding themselves owning more to the bank than their houses are worth, they have stopped paying their mortgage even though they could (I think I read statistics somewhere that support this).
The bottom will be dictated by when the local economy bottoms out. I’m sure some people do walk away when they can make payments. This in no way means everybody has walked that is going to in any particular loan pool as obvious by the increasing rate of foreclosures. The Option ARM resets still will add downward pressure regardless of who walked already.
Job growth has just gone negative in SD and banks have just started failing nationwide. The dynamics of the financial situation is very similar to the one in the 30’s and all signs point to a prolonged DEFLATIONARY period. To what extent, is yet to be seen but thinking this will not affect prices beyond the scope of a normal boom/bust period is naive to say the least.