Mark Zandi is no Pollyanna optimist. As chief economist for Moody's, he frequently dampened the festive mood during the real estate boom with his bearish housing commentary.

But even Zandi, along with his colleagues, think that "a bottom in the housing market is coming into view," according to "Housing in Crisis: When Will Metro Markets Recover?" a paper recently released by "The market's correction to date has been substantial, wringing out many of the excesses that precipitated the crash," the researchers say. "More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability."

According to research done by Zandi, housing analyst Celia Chen, Credit Analytics Director Cristian deRitis, and Economist Andres Carbacho-Burgos, the housing market's low point probably will come in 2009's fourth quarter, as measured by U.S. national home prices, which will have fallen 36.2% from their peak in 2006's first quarter. 

That's a national number, though, which means that some markets will recover sooner and others will lag behind.

For example, Moody's researchers project that Santa Cruz/Watsonville, Calif., will hit bottom in 2009's third quarter, when its home prices will have fallen 44.3% from the area's 2005 peak. Other markets are trending downward. Homeowners in Miami/Miami Beach/Kendall, Fla., will have to wait more than two years—to 2011's second quarter, when home prices will have plummeted 66.4% from their 2007 highs—for their home prices to stop eroding. The reason, as builders know too well, is the foreclosure crisis. "Normally, defaults and foreclosures have little impact on prices," the authors say. "However, the volume of foreclosures is so large that they are an important driver of falling house prices."

The ongoing efforts of elected and appointed officials should help. "Another cause for optimism is that policymakers, though largely unsuccessful at stemming the correction, have been spurred to respond more aggressively because the malaise has spread into a painful recession whose reach extends far beyond housing," Zandi and his colleagues write. "Stronger policy measures are coming that will help place a floor under the housing downturn. These measures will help housing directly, by lowering mortgage interest rates and forestalling foreclosures, and indirectly, through job-generating fiscal stimulus spending that will bolster demand."

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: Miami, FL.