With Case-Shiller on the verge of new post-recession lows, how to gauge the bottom for housing?

[UPDATE, 5/31: Case-Shiller: National Home Prices Hit New Low in 2011 Q1]

About three weeks ago, I wrote a post asking How far will home prices fall?

Today the NYT is reporting Housing Index Is Expected to Show a New Low in Prices, echoing Calculated Risk’s post yesterday: House Prices: Will the March Case-Shiller indexes be at new post bubble lows? In my Savannah Morning News column last Tuesday, I wrote about the falling value of my own house.

Regular readers are aware of my longstanding predictions — even certainty — that home prices would decline significantly after the end of the homebuyer tax credits last year. (See also my post from January, Homebuyer tax credits: A post mortem.)

There will be lots of news when the Case-Shiller numbers are released this week, but keep in mind that those March numbers are actually an average of three months — January, February, and March. Prices have certainly continued to fall since March.

So we’re on a significant slide — although it’s always worth noting that some areas and some price points will hold up better than others. I think the national indices will fall 10% or more from here, but a number of credible analysts think further price declines will be in the range of 5% or so.

There are few reasons for optimism. But is “optimism” the right word? There are millions of Americans — including many young working people who have not been able to buy homes yet — that might benefit eventually from lower prices.

Home prices would obviously be supported by a stronger recovery, but we’re not seeing the aggressive moves by the Fed or by government at any level that would be necessary to fuel the economy in a way that could boost GDP or lower unemployment significantly. As rents stabilize and even increase, we’ll see a firmer floor under many sorts of properties, especially lower-priced homes. If it turns out there are fewer properties sitting vacant than some analysts fear, then we’ll work more quickly through the historically high levels of existing home inventory. (For more on that, see this post at the WSJ.)

A quick correction would be better than a drawn-out one, but the housing market moves at a glacial pace compared to stocks or commodities. There’s little way of getting around that.

I think the biggest uncertainty at this moment is how the markets, consumers, and the economy generally will respond as the news really sinks in that home prices have not bottomed out.

And that word “bottom” raises some interesting questions. We’ve seen sales of both new and existing homes bottom, more or less; that’s pretty good news for realtors. We’ve also seen new home construction level off at a very low level, which might be good news for some builders. Multi-family housing starts — those built as rentals — seem likely to increase in 2012 and probably for another year or two beyond that; that’s definitely good news for builders.

The bottom for prices, however, appears to be many months away.