…and why it is nowhere near bottom, but here is the key factor to keep in mind:
Supply and demand do not respect replacement values. Homes in highly desirable urban areas with walkable neighborhoods and nearby public transit and retail are still commanding bubble-era prices here in the San Francisco Bay Area, as these qualities are still attracting buyers who are qualified by virtue of huge cash down payments–vast cash positions which in many cases were created by selling their previous homes at the bubble top 2005-2006.
These few homes are still fetching prices far above replacement, while their exurban counterparts are slumping toward “market clearing” prices–the price at which cash buyers appear.
…and evidence points to similar scenarios all over the country. This isn’t abnormal in the sense of what is happening. Prices are merely finding where they belong. The last ten years were what was extraordinary.