The worst of the price declines is likely over. From the market peak in 2006, the S&P/Case-Shiller index of 20 housing markets is down 32 percent. Ugly indeed. But what’s important is what comes next, not what we’ve just come through. And no one is suggesting we have another 30 percent to go. Zandi recently said that another 5 percent slide in home prices might be on tap. To be clear, no one is suggesting roaring price gains are on the horizon either. The takeaway is that we’re potentially at an important pivot point where we’re moving from steeply falling home prices to an extended period of stabilizing prices.

Mortgage rates are at historic lows. Right now the 4.6 percent interest rate on a 30-year fixed rate mortgage is beyond fire-sale cheap, as is the 3.78 percent interest rate for a 15-year mortgage. Assuming rates will stay where they are at, or even fall some more, seems a risky bet. Fannie Mae expects the 30-year fixed rate will hover around 5.2 percent by the fourth quarter of this year, then rise slightly throughout 2012 to 5.4 percent or so. The 2012 forecast is 5.7 percent, more than a full percentage point above where we’re at today.

If you take out a $300,000 30-year fixed rate loan today at 4.6 percent your monthly tab will be $1,537. But let’s say you instead decide to wait another year or more on the theory prices are heading lower. If during your wait the 30-year fixed rate rises to 5.7 percent you would need home prices to fall nearly 12 percent to come in at the same monthly mortgage cost as what you can get now. That’s more than double the price decline most market watchers are expecting.