Another string of gloomy home sales reports in the US has revived talk of a "double dip" and predictions of a prolonged slump.
But some insiders are starting to see a glimmer of hope in the housing data. The market has not hit bottom yet, but the bottom may be in sight.
"We're seeing some positive indicators, if we were in a normal marketplace," says Jack McCabe of McCabe Research & Consulting in Florida. "The problem is we are in anything but a normal market."
It is still difficult to put a positive gloss on the recent numbers, which have failed to recover since the subprime disaster in 2007 that triggered the global financial crisis.
Median housing prices in 20 of the largest US cities are back to 2002 levels, according to the latest Standard & Poor's Case-Shiller Index, released at the end of last month.
In many cities, prices have fallen to levels not seen since the 1990s. The median price of a single family home in the Miami area fell 19.7 per cent in the first quarter of this year from the same period last year.
In 2008, the median price of a home in Miami was $285,000 (Dh1m). Now it is about $153,000.
Several factors are weighing on the market, including a glut of repossessed and distressed properties. Homes in some stage of foreclosure accounted for 28 per cent of US sales in the first quarter, according to RealtyTrac, a research company. The average repossessed home sold for 27 per cent less than other homes on the market.
In Las Vegas, one of the cities hit hardest by the property collapse, distressed properties accounted for more than 40 per cent of sales in the first five months of this year.
At the same time, banks are reluctant to lend money to prospective buyers.
"There's been a pendulum swing from very loose standards which led to the housing boom [and] to unnecessarily restrictive practices as an overreaction to the housing correction," says Dr Lawrence Yun, the chief economist of the National Association of Realtors. "This overreaction is clearly holding back the recovery."
A slower-than-expected economic upturn, including an unemployment rate hovering above 9 per cent, is also dampening any housing recovery.
"We're like a gigantic bear with a foot caught in a trap," says Dr Anthony Sanders, a property finance professor at George Mason University.
Prospective buyers also remain wary of moving into the housing market. "On the demand side there is a fear factor," Dr Sanders says. "People fear the market could go a lot lower." But despite the gloom, there are positive signs in the market.
The so-called "shadow inventory" of distressed properties, those not currently for sale but likely to hit the market soon, fell to 1.7 million homes in April, an 18 per cent drop from January last year, according to data from CoreLogic, which tracks the market. If distressed properties are deleted from the equation, home prices have remained relatively flat in recent months, CoreLogic reports.
But the most severe problems are in the four so-called sand states - Florida, Arizona, Nevada and California - which experienced the biggest increases during the boom years, largely because of speculative buying.
Outside those areas, some cities are reporting increases in sales and prices. Lenders are cautious, though, as mortgage interest rates remain low, averaging about 4.5 per cent.
"The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year," says Dr Yun.
The number of distressed sales is expected to slow by 2013, according to Moody's Analytics. Some analysts expect the flow of repossessions to subside sooner, perhaps by the end of this year, as studies show fewer homeowners are falling behind on mortgage payments.
During the collapse, construction of new homes virtually stopped, providing hope that sales would start to reduce the glut of available homes in many cities. And there is pent-up demand.
"Household formation", representing the number of potential buyers, is increasing. Sixty-seven per cent of renters plan to become homeowners in the next five years, according to a survey by the research company Zelman& Associates.
"[The market] hasn't hit bottom yet, but it's closer than it has been," says Mr McCabe, who believes conditions could begin stabilising within a year or two.
In many cities, prices are down 30 to 50 per cent from peak periods. The ratio of home prices to income is 20 per cent lower than the 15-year average, according to Moody's Analytics.
"There are phenomenal deals to be had, especially if you're a cash buyer," Dr Sanders says. But with the US economy still fragile, he warns: "If the economy doesn't grow, all the forecasts of recovery are out the window."