I am not saying the bottom in home prices is here.  Rather, signs of classic behavior that a bottom is near are at hand.  From Wednesday's Wall Street Journal

LOS BANOS, Calif. -- In this California city, one of the hardest hit in the national housing crash, there's good news: Homes are starting to sell again.

Investors and first-time home buyers are snapping up foreclosed houses here, with the number of local sales up almost fivefold from this time last year. While the volume of existing-home sales across the U.S. fell 10.7% in August from the previous year, according to the National Association of Realtors, there are signs that the most damaged of markets are starting to heal themselves. Across hard-hit California, sales volumes rose 65% in September compared with a year ago, said MDA DataQuick, a San Diego-based real-estate information service.

The bad news is that the latest round of sales is unleashing another round of pain in cities such as Los Banos, a commuter community in California's Central Valley. With home prices already down 66% from their peak here, most homeowners owe more on their mortgages than their houses are worth. Successive deals bring new low prices, leaving remaining owners with little incentive to keep current on outsized mortgages.

At the bottom, markets have to clear at rock bottom prices, particularly in those markets that were the craziest.  With sales up 65% from a year ago and home prices down as much as 66% in some areas, it appears that the debacle in the California home market is at the beginning of the end.

Many of those sales are foreclosures.  Foreclosed sales are even better because banks are finally capitulating and clearing the depressed assets off their balance sheets, which has to occur to cleanse the banking system.

Mr. Knoff's house has traveled the arc of the local market. Built on vacant land in 2002, it sold for $280,000. Its original owner unsuccessfully tried to sell it in 2006 for $450,000. Mr. Knoff bought it out of foreclosure in March of this year for $320,000. Today, based on local sales, he figures the house is worth about $220,000. ...

Then Steve Sherman Sr. spoke. "I am one of those troubled borrowers not making any mortgage payments," Mr. Sherman said. The 61-year-old shipping and warehouse supervisor refinanced his house in Los Banos two years ago for $365,000, spending much of the new loan on home renovations. Now, he figures, the house is worth $140,000.

Home prices cut in half are bad for the homeowners but good for those looking for an end to the housing bust.

[S]ome economists say the market is already correcting itself without federal intervention. The volume of home sales in California is rising even as the national average continues to fall. At the same time, median prices in the state fell in September, down 34% from the previous year, to $283,000, according to MDA DataQuick.

That is almost looking affordable.

The other evidence of an extreme, whether on the upside or the downside, are extreme predictions, such as this one.

But the bottom still may not be in sight. Home prices in California could end down as much as 60% from peak values, according to recent research from both Barclay's PLC and J.P. Morgan Chase & Co.

Dow 36,000, the loonie going to US$2, and now, home prices falling 60% in California.

The bottom is not far away.