He quotes an entry in the "Calculated Risk" blog, which states that:
"especially [in] the mid-to-high priced bubble areas, there will be further price declines... It seems there are many more foreclosures coming. Some of this depends on the success of the modification programs, but the Q2 MBA delinquency report shows a growing number of homeowners in the problem pipeline".
Krugman himself thinks that:
"In 2005-6 it was a slam-dunk prediction that housing prices were headed for a huge fall; that was obvious to everyone except the likes of Alan Greenspan and everyone else who mattered (and a few who didn’t, like Larry Kudlow.) At this point, squinting hard at various measures suggests that housing prices are still a bit high, but we’re within debating range. Home prices could stabilize not too far from here".
"The Economist" also sees signs of continuing trouble:
"the recovery’s foundations look shaky. Rising joblessness will continue to weigh on demand for homes. The unemployment rate, currently 9.4%, is expected to peak at more than 10% some time next year... Consumer confidence remains fragile... For those seeking a mortgage, credit is still hard to come by... With 1.8m homes already in foreclosure, a “similar amount” may be heading that way... the rise in negative equity — when a borrower’s mortgage debt exceeds the value of his home— is also fuelling foreclosures, not least because many would rather walk away than keep making payments on a home that is worth much less than the sum owed on it. Zillow.com, a property-information service, estimates that 23% of homes with mortgages are underwater. Others put it higher. A staggering 60% are submerged in Las Vegas. Deutsche Bank’s securitisation team expects negative equity to peak at 48% of total homes by 2011. That may be too pessimistic, but all agree that the number will rise further".
"The Economist" concludes that: "
Most economists expect them to fall by a further 5-10 percentage points, to their long-term trend line at roughly 40% below their peak, and not to reach bottom until some time in 2010. The pessimists predict they will go crashing through the trend-line to as little as half their 2006 high.
Personally, I think prices will continue to fall, especially in metropolitan areas where they had more than doubled in the 2000-2006 period (Miami, Los Angeles, Washington D.C., San Diego, Las Vegas, etc.).