Default rates on mortgages in California are 9.5%. That number is huge! One in ten home owners can't afford, or refuses, to pay for their home. A recent historical figure is 60% of defaults go to foreclosure. That means it is reasonable to think that within the next couple years 6% of California homes will be sold as foreclosures. I can't imagine any sort of rebound under those circumstances.
Next, I am predicting the end of the bubble to be the inflation adjusted start of the bubble. Actually the trough before this bubble was in 1997 and home prices may have been legitimately too low at that point. So I have maintained that 2000 price levels are where the crash stops. There is no philosophical reason commodities beat inflation in the long run unless their supply is limited. Housing is no exception.
Looking at Case-Shiller(click on the graph if it is unclear), which follows individual homes as they are bought and sold and is therefore immune to the phenomenon that average home prices are being brought down because expensive homes just aren't selling at all, it is pretty clear we have a ways to go in the drop. We went from 225-150, and will likely settle at 100(I am not sure it is inflation adjusted, if not something like 125 may be bottom). Either way we are more than half way to the bottom.
Another way to see we are closer to the bottom than the top is the case shiller graph in percentages. The most rapid percent drop in prices is probably that peak a few months behind us. If my prediction is correct the area below the curve will equal the area above the curve from 2000-2006. That much of a fall would actually leave a surprising amount of gain since 1997 since during those years home prices were increasing by 4-10% a year. This means a worst case scenario would probably go farther than my prediction and meet 1997 prices.
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