Most markets tend to over-correct there normalization or equilibrium models before they stabilize. Given the illiquid nature of real estate and its dependence on financial markets, these over-corrections can go on for a while. Throw rising unemployment and constricting credit into the mix and it will probably put added pressure on the over-correction of prices and duration. Growing negative sentiment will most likely play a large roll as well.
Therefore, I would consider “normal ratio’s” as one indicator towards a slowing decline, but by no means an end of the decline. IMO, there are just too many other large negative forces working on the housing market at this time.
If you study the nature of deflating markets, it’s an amazing economic event and not easily stopped.
