Normally I would just add this article to Joe's excellent post, but this point is so important that it deserves its own section.

Three out of four U.S. homeowners think the worst is over in the housing market.

And half of the homeowners in Southern states – including Texas – say home prices will stabilize in their areas in the next six months, according to a new survey by Zillow.com.
...
Almost a quarter of homeowners in the South said they think their properties will increase in value during the next six months.

"While homeowners are now more realistic when looking backward, they are still pretty starry-eyed when looking forward, with three out of four homeowners believing that their own homes' prices will increase or be flat over the next six months," Dr. Stan Humphries, Zillow's vice president of data and analytics, said in the report. "Unfortunately, there are few markets we expect to perform this well."

Thousands of potential sellers are waiting on the sidelines, Zillow said.

More than 30 percent of homeowners said they would be likely to put their houses up for sale at the first sign of a market rebound. That's bad news for prices.

"With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices," Humphries said.

Millions upon millions of homes are ready to be put onto the market the moment that housing prices begin to rebound. When you wrap your mind around that idea you have to realize that home prices will not return to 2006 highs in your lifetime.

On top of that, you have to account for at least 600,000 bank owned houses that aren't for sale, aka "shadow inventory".

“We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,” said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. “California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.”

Whether this is because banks don't want to mark the losses on their books because it would make them insolvent, or if they are also waiting for a rebound in the housing market, the amount of supply waiting to hit the market will overwhelm all rebounds of any kind.

Of course this doesn't stop the spin masters from trying to engineer a rebound. For instance, I turned on the news the other night and saw this.
42 offers for one property sounds impressive. But someone else had done their research.

The sale of CBS5’s infamous "42 offer" home at 555 Edinburgh closed escrow on 4/22/09 with a reported contract price of $570,000. That’s $111,000 (24%) over asking!

On a price per square foot basis ($456), however, that’s 0.2% over the 2009 neighborhood median to date ($455), 6.9% under the median last year ($490), 21.3% under the median in 2006 ($580), and about equal to the median in 2004 ($450).

Once again, the 42 offers were a result of pricing rather than a "real estate rebound."

It's also a fair guess that the other 41 offers were quite a bit lower than that.