As to be expected, the mass financial media and most real estate market professionals (and of course a lot folks who have been well-trained by the Fed to "buy the dip" over the last 30 years) expect that the worst is over for the sector. Au contraire, mon frére (I guess I should say "al contrario, il mio amico - lol), there are several key forces at play, most of which go underreported, not reported, or are based on industry/Govt data which is highly manipulated.
Inventory - The biggest problem facing the housing market is the massive inventory sitting out there. Of course, the Nat'l Assoc. of Realtors reports the inventory of homes for sale to be around 3.7 million, or 9.5 month supply based on the existing rate of sales. Remember that rate of homes sales is still declining - existing home sales were down 28% for Nov '10 vs. '09 and new home sales were down 21% - so as we go forward, unless this rate picks up, the number of months it would take to clear the existing "for sale" inventory increases.
But there is a "shadow" inventory out there defined as pending REO (bank owned), pending foreclosed inventory and homes with mortgages in serious delinquency. Corelogic has defined this number to be around 2 million homes. Here's a great chart I borrowed from calculatedriskblog.com: